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Chapter 14 - PowerPoint PPT Presentation

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Compensation of Special Groups. Chapter 14. Chapter Topics. Who are Special Groups? Compensation Strategy for Special Groups Your Turn: Compensation of Special Groups. Who Are Special Groups?. Supervisors Corporate directors Top management executives Professional employees Sales staff

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Presentation Transcript
chapter topics
Chapter Topics
  • Who are Special Groups?
  • Compensation Strategy for Special Groups
  • Your Turn: Compensation of Special Groups
who are special groups
Who Are Special Groups?
  • Supervisors
  • Corporate directors
  • Top management executives
  • Professional employees
  • Sales staff
  • Contingent workers
characteristics of special groups
Characteristics of Special Groups
  • Tend to be strategically important to a company
  • Positions tend to have built-in conflict that arises because different factions place incompatible demands on members of group
issues supervisory pay
Issues: Supervisory Pay
  • Caught between demands of:
    • Upper management in terms of production and
    • Employees in terms of rewards, reinforcements, and counseling
  • Major challenge in paying supervisors
    • Equity
  • Provide incentives to entice nonexempt employees to accept challenges of being a supervisor
strategies supervisory pay
Strategies: Supervisory Pay
  • Pay strategies
    • Key base salaries of supervisors to an amount exceeding highest paid employee
    • Pay supervisors for scheduled overtime
  • Trend in supervisory compensation
    • Increased use of variable pay
    • More than half of all companies have a variable pay component for supervisors
corporate directors
Corporate Directors
  • Stockholders blame corporate directors for excessively high executive compensation
    • Directors are much more active in decision making and somewhat less prone to grant huge salaries to the CEO
    • Approximately two-thirds of boards now include more outside directors than inside directors
    • In exchange for meeting at least quarterly a typical director receives about $55,000 in cash and incentives and a total of about $150,000
  • Pay is linked to company performance
    • Company performance exceeds industry standards, big bonuses and stock payouts follow
    • Poor financial performance means much smaller pay packages
  • Ways to rein in executive compensation
    • Use of tally sheet
    • Increase government regulation
      • Stockholders can vote/ propose limits to compensation
explanations for ceo compensation
Explanations for CEO Compensation
  • Social comparisons
    • Executive salaries bear a consistent relative relationship to pay of lower-level employees
  • Economic approach
    • Value of CEO should correspond to some measure of organizational success
  • Agency theory
    • Incorporates political motivations
    • CEO compensation should be designed to ensure executives focus on best interests of firm and stockholders
components of an executive compensation package
Components of an Executive Compensation Package
  • Base salary
  • Short-term (annual) incentives or bonuses
  • Long-term incentives and capital appreciation plans
  • Executive benefits
  • Perquisites
exhibit 14 7 description of long term incentives for executives
Exhibit 14.7: Description of Long-Term Incentives for Executives
  • Incentive stock options
  • Non-qualified stock options
  • Phantom stock plans
  • Stock appreciation rights
  • Restricted stock plans
  • Performance share/unit plans
exhibit 14 8 popular perks offered to executives
Physical exam

Company car

Financial counseling

Company plane

Income tax preparation

First-class air travel

Country club membership

Luncheon club membership

Estate planning

Personal liability insurance

Spouse travel

Chauffeur service

Reserved parking

Executive dining room

Home security system

Car phone

Financial seminars

Loans at low or no interest

Legal counseling

Exhibit 14.8: Popular PerksOffered to Executives
scientists and engineers in high technology industries
Scientists and Engineers in High-Technology Industries
  • Scientists and engineers are classified as professionals
  • Problems in designing pay
    • Salary plateaus due to knowledge obsolescence of mature professionals
      • Dual-Career Ladder
    • Question of equity
reward components professional employees
Reward Components: Professional Employees
  • Dual-career ladders
  • Performance-based incentives
    • Profit sharing
    • Stock ownership
  • Bonuses
    • Completion of projects on or before deadlines
    • Patents
    • Publications
    • Elections to professional societies
    • Attainment of professional licenses
  • Perks based on unique needs of professional employees
conflicts faced by sales staff
Conflicts Faced by Sales Staff
  • Often go for extended periods in field with little supervision
  • Challenges
    • Staying motivated
    • Continuing to make sales calls despite little supervision
key factors designing a sales compensation plan
Key Factors: Designing a Sales Compensation Plan
  • Nature of people who enter sales profession
  • Organizational strategy
  • Market maturity
  • Competitor practices
  • Economic environment
  • Product sold
sales compensation packages
Sales Compensation Packages
  • Guaranteed base salary
  • Guaranteed base salary + commission
  • Guaranteed base salary + bonus
  • Guaranteed base salary + commission + bonus
  • Commission only
  • Combination plan
contingent workers
Contingent Workers
  • Types include a person who works
    • Through a temporary help agency
    • On an on-call basis
    • As an independent contractor
  • Typical salary arrangements
    • Workers in first two categories often earn less than workers in traditional arrangements
    • Independent contractors often earn more
key issues in contingent workforce compensation
Identify ways to deal with equity issues

View workers as pool ofcandidates for morepermanent hiring status

Champion idea ofboundary less careers

Key Issues in Contingent Workforce Compensation