Essay on Internal and External Equity Compensation

This paper will discuss the reasons why CEOs are not being overpaid. It will apply the utilitarian ethical principle to many a few aspects to CEO compensation and whether or not it is justifiable for such pay. The paper will look at whether or not their performance is justifiable for the pay because they play such a big role in the livelihood of the company along with the principle agency theory and how it is being addressed for the benefit of the shareholders and others involved with the company, the supply and demand of the CEOs, and the paper will describe the comparison of other professions to help link the idea of CEOs being fairly compensated.

One of the important aspects of business management is having a proper compensation system. Compensation ensures that the staff of the company obtains the results of their efforts. Compensation is a cost to the enterprise and, therefore, a proper remuneration model must demonstrate its ability to produce returns. Also, since compensation is what the employees get in exchange for their services, the type used must be one that will motivate the employees (Belcourt & McBey, 2015). Henderson printing company is a mid-level company. Therefore, it requires a very critical remuneration system that will help it to survive. This memo explores the compensation models that Henderson printing operates as well as suggests the necessary changes.

The challenges of an organization can influence the performance of an organization from a satisfaction with pay (Gomez-Mejia, Balkin, & Cardy, 2016, p. 296). The employee salary within an organization is a huge cause for turnover of employees (p. 296). First, the topic of employee salary is of great importance for the current and potential workforce (Lee & Lin, 2014, p. 1577). In addition, employees that have the perception on receiving lower compensation that others within their market will lack in performance and have a desire to leave the organization (p. 1577). In retrospect, the regular evaluation of compensation within the organization is vital to the reduction of employee turnover (p. 1577).

The CEO’s compensation should be set on how well the firm performs and should be awarded based on the performance of the stocks in the long run. It is easier to measure performance by the growth rate in the profits that have been reported since intrinsic value cannot be fully

The term compensation refers to all forms of financial returns and tangible benefits that employees receive in exchange for their time, talents, efforts, performance, and results (Bernardin & Russell, 2013) Presumably, employees are motivated by the compensation they receive in all combinations to include their benefits packages. Naturally, employees want to be able to take care of their family to include having good medical coverage and other related benefits. Equity is said to occur when a person perceives that the ratio of his outcomes to his inputs is equal to other’s outcome/input ratio (Salvendy, 1976). Of course, employees want more money, and companies want more work out of each employee. With the cost of benefits like health insurance continuing to rise, companies have to take the higher cost of benefits into consideration when implementing pay

Internal and External Pay Equity. Find an article through ProQuest that discusses pay equity as it relates to KSAs. Address the importance of managing pay equity (both internal and external) and the consequences for not doing so. Also address the role of pay equity and employee job satisfaction and motivation from a strategic perspective. Present your views in 200 words or more in your discussion post. Respond to at least three of your classmates’ postings. Remember to properly cite your sources.

With the constant change in today’s business world, to have a competitive advantage makes it difficult for employers to attract and retain the most talented employees. Identifying the company’s compensation strategy ensures the organization offers the right pay and manages the pay increases to retain top talents. When we hear the word compensation we think about compensating an employee for their work performed, but there

When making compensation decisions, whether it is internal or external, comparisons must be considered. However, employers must carefully balance pay structures, because internal and external comparisons may not converge. Therefore, employers may differ in the way they place priorities on internal and/or external comparison data when they are developing pay structures.

This focuses on the idea that much of the company’s growth will reflect towards equity-based salaries. By doing this, it will “align the interests of corporate management with the company’s shareholders.” Essentially, if the company does well, then the executive will be compensated higher. This will encourage management to work harder to improve performance thus increase the stockholders wealth, as well as their own when stock prices rise.

A well-articulated compensation philosophy drives organizational success by aligning pay and other rewards with business strategy. It provides the foundation for plan design and administration and anchors current and future plans to the company's culture and values (Kaplan, 2006, p.32). Recognizing and rewarding achievement is the cornerstone of the company A’s compensation philosophy. The mission of the company is to attract, select, place and promote all individuals based on their qualifications. The company believes that performance-based compensation helps attract, develop and retain talented professionals. In addition to base pay which based upon local market conditions and targeted to be above market, the company provides the following types of potential compensation to reward performance:

According to Matsumura and Shin (2005) the ratio of executive to worker pay has climbed from 42:1 in 1982 to 301:1 in 2003. This has invited a lot of criticism from the shareholders, employees and has attracted the attention of restrictive regulators. Perel (2003) tried to assess the issue by examining both the claims that CEOs are overpaid for the value they add to an organization and that CEO pay is inherently

Not only does this create significant problems internally, but also problems within the organization which will determine the organization’s ability to maintain sustainability or growth in external markets. The internal labor market, which is determined by employees and the “pressure” (Lazear & Oyer, 2004, p. 2) applied within the working environment itself, changes based on factors of compensation; most notably when the environment is competitive or employees feel they are being treated unfairly for work

This paper will examine setting the stage for strategic compensation and bases for pay. There are three main goals of compensation departments: internal consistency, market competitiveness, and recognition of individual contributions. Internally consistent compensation systems define the relative value of each job among all jobs within a company. (Martocchio, pg. 22, 2011) With this system companies want employees to be paid more based on their qualifications and responsibilities. They believe someone with less experience should be paid differently. To determine such evaluation companies use job analysis in order to provide job descriptions. The job evaluation is to determine pay according to a particular position. Market-competitive

If an organization hopes to cultivate a workforce that is engaged and motivated to help it follow its strategy and reach its business objectives, the organization must create a pay structure that employees believe values their contributions and is equitable across positions. Internal alignment refers to the policy that evaluates the similarities and differences between jobs in the organization and then helps create a pay structure that is fair and equitable based on the relative skills and contributions of each position. Based on this information, I feel that my previous employer did have equitable job levels and pay differences. If an organization wishes to create internal alignment, they must first have a comprehensive understanding of the

In today’s competitive workforce, compensation and benefit packages plays a crucial role on recruitment and retention for both the organization and the employee. Bumpbie finds itself in a situation where it could positively affect its employee’s morale, turnover rate and longevity; by making a strategic decision to implement compensation and benefit packages that will encourage current workers to stay and entice new applicants. Money is not always the inherent reason businesses experience high turnover rate, the constant shifting in the job market will always be a contributing factor as well as employee’s moral. Mayhew, R. (2016), explains that an “employee compensation plan” refers to all the components offered as well as the way in which they are paid, and the reason behind the employees getting the compensation case bonuses, salary increases and incentives. The fact that there are voluntary and mandatory benefits that organization provides to their employees give employees the freedom of choice, as well as the option to make the whether to stay with or leave an organization based on the benefits it provides. Variable Pay is also an option that some employers offer their employee which is performance based or results oriented. Whether it is profit sharing, merit based programs or incentive bonuses; it all comes down to which organization can provide employees with the compensation or benefits packages that best satisfy their needs.