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COMPENSATION CH. 1

Better Essays
Ch. 1: “The Pay Model”
Your Turn…
1. The replacement of highly paid workers with lower-paid workers did not cause Circuit City to perform so poorly. I have come to this conclusion based off of the section, Caveat Emptor, and am confident in my response. I do feel as though the variables were measured effectively and were useful in their research. However, just because it was useful does not mean they were actually related. The replacement of the highly paid workers with the lower paid workers is not necessarily the reason for Circuit City’s poor performance. Even prior to 2007, Circuit City’s stock prices from 2001 onward was always below Best Buy, and for the most part below Amazon and Walmart. I would have to agree with BusinessWeek
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This causes competitive labor costs not to be of equal importance in the two industries. Best Buy is a retailer while the airline industry is a mode of transportation. Cutting labor costs in Best Buy would have much more of an effect than it would for the airline industry.
Review Questions
1. Differing perspectives affect our views of compensation. It does not mean the same thing to everyone. A person’s view can differ depending on whether you look at compensation from the perspective of a member of society, a stockholder, a manager, or an employee. Everyone is different. For example, an employee may have a different idea of what compensation is when compared to a stockholder. An employee may see compensation as a return in exchange between their employer and themselves, as an entitlement for being an employee of the company, or as a reward for a job well done. A stockholder on the other hand would have a different point of view. Stockholders are interested in how employees are paid and some believe that using stock to pay employees creates a sense of ownership that will improve performance which will in turn increase stockholder wealth. Additionally, compensation becomes a great interest to stockholders when it comes to compensating the CEO.
2. I can definitely relate to the definition from the employees point of view. My personal definition for compensation is what I get in return for my hard
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