Are corporate executives compensated excessively? Why or why not?
The corporate executives are compensated excessively. It is documented that for last ten years, corporate executives were compensated three times more than the usual worker. The report reveals that a US Chief executive office earns 365 times more than what a normal employee earns a day, they are rated the leading earners in the whole world. For instance, in 1974, it was estimated an American CEO earned over 30times than a factory worker. Statistically, the rate of pay of the CEO gradually increased from 120 times in 1990 to 431 times in 2004. The reason behind these was due to corporate revenue increment and the cost of living that had increased (Baron, 1999).
A study was conducted in the US companies that was aimed at finding out the problems associated with the highest pay that were awarded to the CEO, the study revealed that for every 1 percent of the compensation that was given to the top five corporate executive resulted into a fall of 22 percent in share holder returns.
Would you choose to be in a pay-for-performance plan? Why or why not?
For efficiency and effectiveness Pay-for-performance plan is appropriate way of compensating employees in a company. First, an employee will feel satisfied only if pay for performance method is used because he is paid according to the amount of work he has done. The method is also profitable to the company mainly because the employees are compensated as per the work done. In respect to this neither the company nor employees will feel dissatisfied.
The second method of compensation that is currently used by majority of the companies in the modern world is point factor plan. According to this approach, factors are considered before an employee is compensated. This approach considers factors such as job characteristics, value for the pay of other related jobs, responsibility of the employee, working conditions and skills that are used in the job.
Thirdly, market pricing approach where the company compensates its employees basing on the prevailing market conditions. The approach relies on the information in the marketplace in order to set the pay. This has been considered by small companies more convenient approach as it reduces expenses and saves time. However, the approach does not favor small companies because large companies may be compensating its workers in relation to its huge profits unlike small ones that have many workers and small profit margin.
Lastly, other companies employ raking method in compensating its employees. During job evaluation, the company groups its employees according to skills. That is, an employee with a master’s degree will be ranked in the top position hierarchically as compared to an employee with a certificate in the same field (Earl D. Honeycutt, 2003).
Is this a violation of the EPA?
Currently, laws have been formulated to look into the welfare of the employees either in terms of compensation, which is under Equal Pay Act (EPA), employee security after retirement that is under Employee Retirement Income Security (ERISA) among others. Basing on EPA, Pay for performance approach of compensation is a fair method as it ensures that employees treated fairly with justice and are not abused.
The law stipulated that all employees be paid without any injustices. In compensating employees, a company should consider the performance rather than the level at which an employee is ranked. Since the formulation of the law, Corporate Executives were against the idea because their compensation was supposed to be slashed down. High compensation has resulted into a downfall of labor market in the U.S. globally in some industries. Traditionally, corporate executives were being compensated excessively simply because of their ranks and not the work that has been preformed. Nowadays organizations have been limited in such a way that an individual employee is compensated basing on the performance (Colter, 1998).
What about Title VII?
In some cases, employees are treated by employers basing on religious beliefs or practices. According to Title VII of the EPA, employers should not favor their employees according to their religious background in relation to work condition. The law protects employees against any religious discrimination in regards to employment.
CRITICAL THINKING APPLICATION 10-B
1) Conduct a Web search to determine whether you can find pay data that are relevant to the claims in the letter. The legal implications aside, what should Dr. Boseman do?
Following Kate’s case, it clearly reveals that women are discriminated by employers during compensation as compared to male workers in the same job group. The EPA fights for equality for men and women to be given equal pay for the work done. Kate’s job was identical to that of his colleague Male employees though she was paid $10000 less. This clearly indicates that there was gender discrimination as the employer discriminated paying Miss Kate less amount though she was qualified and had experience when compared to her workmates.
Legally, men and women are to be compensated the same amount with the ground that they both perform the same work, work under the same job group evaluation scheme and that they possess equal skills, efforts and can both participate in decision making in regard to work quality or quantity performance. The Act provides for exceptions that compensations should only vary in a situation where education and experience differs (Vyver, 1996).
Kate being experienced employee more that the newly recruited colleague she was entitled to a better compensation. Despite the fact that male employees had good qualifications, he had no experience as compared to Kate (Genevieve, 1993).
Considering Kate’s case the employer was not rational in employing the salary scale for the workers, there was no equality in administering the pay regarding Male employee and Ms. Kate. The EPA supports that regardless of gender all the employees should be paid equal. Male employee had good credentials that made him qualify for the highly compensating job, however, considering the credentials that lead to a high salary for an individual performing the same job, Male employee felt-short of other credentials such as license to supervise students who were on an internship. The other two male individual who were also hired to serve the same post as Ms. Kate did not have the credentials that match that of Ms. Kate (Henry, 2000).
On the other hand, Ms. Kate had impressive academic credentials and a wide field of experience ranging from six years of experience as a staff, graduating students’ interns and being a county specialist responsible for case that pertains sexual assault and rape. In addition, she had Masters Degree in Social Work.
Does Ms. Kate have a case?
In light of the letter presented by Ms. Kate to Dr. Boseman, it is evident that Ms. Kate has a case. The case poses some legal implication attached to it; this is concerning gender discrimination. The salary scale employed by the employer contravenes the rule of Equal Pay Act.
Baron, D. (1999). Moses on management: 50 leadership. Simon and Schuster.:
Colter, C. (1998). Tranforming work place culture. London: Triangle Park Creative.
Earl D. Honeycutt, J. B. (2003). Sales management: a global perspective. NY: Routledge.
Genevieve, A. (1993). Research and strategies for primary prevention of work place alcohol problems. New York: Cengage: Learning.
Henry, J. (2000). Writing work place culture: An archaelogy of professional writing. London: John Wesley and Sons.
Van der Vyver, J. W. (1996). Religious human rights in global perspective: Legal perspectives. Martinus Nijhoff Publishers.