Analysis Of Compensation Equity Is Very Popular Right Now

The topic of compensation equity is very popular right now. Concerns about gender pay gap, CEO pay ratio, and pay satisfaction as it relates to employee performance are especially prevalent. For this discussion we will focus on the ethical implications of CEO pay ratio but in order to do this we must first define compensation. Often CEO compensation is comprised of cash salary, bonuses, stocks, options, etc. It is not unusual for companies to have requirements about the percentage of the CEO total compensation that must be held in stocks in an attempt to incentivize good performance. The required company investment may have other limitations such as restrictions on when stocks can be purchased and sold (Core and Guay 2010). This is†¦show more content†¦If all employees earned satisfactory wages, the pay ratio would decrease. According to Henderson and Fredrickson (2001), it is necessary to distinguish between economic views and behavioral views that embody various pay gap theories. Economic perspectives emphasize competition while behavioral perspectives emphasize cooperation (p. 97). Relative deprivation theory states that when lower level employees feel like they are receiving less than they deserve, it can lead to adverse behavior (p. 97). Tournament theory proposes that CEO pay gap promotes competition and the gap between successive ranks increases with hierarchical level (p. 99). This theory relies on strong incentives to justify pay gap and encourage positive behavior from employees, however, this approach favors the individual so for organizations that require coordination and cooperation, this can elicit self serving behavior. When collaboration is vital to an organization, the allocation preference theory proposes that pay is distributed relatively equally to maintain social harmony and dis courage destructive employee behavior (p. 98). Another key consideration is how dominant cultural values impact organizational structure. According to Tosi and Greckhamer (2004) national cultures emerge from a broad set of forces which results in a dominant cultural value set and isShow MoreRelatedEmployee Motivation And Job Performance Evaluation Essay1875 Words   |  8 PagesIn today’s worker environment, compensation is a major deciding factor in being a desired, competitive company looking to hire and retain their employees. Compensation packages include the following: salary, 401 k plans, health care benefits, stock options, vacations, bonuses, etc (Compensation, 2016). A compensation benefit package needs to have a clear and concise orientation of expectations for workers’ performance; in doing so, it will promote an effective strategy which can be outlined withRead MoreCompensation Benefits1892 Words   |  8 PagesCompensation Benefits BUS455 Final Exam This is an open book and open notes exam. You may use whatever materials you feel necessary. 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