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I personally think that executive compensation is validated. These executive have an extensive amount of responsibility and duties and they deserve to be adequately compensated. However I did not agree with Crystal in the video when he expressed that he wanted to further the gap between executive compensation and other employees. While I do believe these executives deserve to be paid more, I don’t think it should become such a wide gap that it angers employees and creates a negative culture. By keep the gap at a reasonable amount it also shows the humility of the executive and helps employees to understand why they are paid more rather than driving them to resentment. In the video it gives examples of CEO’s that were paid almost 500 to 1 of their employees. This to me is too extreme of a pay gap.

One major factor that explains the rise in executive compensation is that “the boards of directors in the US are seeking outstanding leadership and they consider the CEO to be the single most important factor in the future success of that company in the next 5-10 years”. Therefor they justify this significant executive compensation to help ensure the best future for their company. They see this as “paying for performance” however there is not clear link between their pay and the performance of the company.

In the video it mentioned that in the 1990’s, CEO pay was rising regardless of the company performance (profit). This is not justifiable to me. As we have talked about in class “paying for performance” is one of the most effective motivation tools (Michele Swift Week 6 Lecture). This helps correlate and justify the amount an executive is being paid and the performance of the company. Therefor I think that more companies should implement this type of incentive based pay to be able to justify the significance of higher executive pay. Their pay should only be increased if their performance truly increases. This will also help employees to see the connect between the success of the company and why their executives are paid a substantial amount more. Another change that could be effective is implementing “incentive based pay” as we also talked about in class (Michele Swift Week 6 Lecture). They could do this by setting profit goals for the company and incentivizing the CEO to reach these by providing a bonus at the end of the fiscal year. Therefor they are being properly rewarding for producing better performance.

I really enjoyed our discussion about different discretionary benefits companies offer in class this week. I’ve always planned to work for my family business after graduation and have not had the opportunity to compare different job offers and weigh the benefits offered.  Based on what I know about benefits, the most important ones to me would be a 401k (and matching), paid time off (sick/vacation days)/family emergency time off, and health insurance. After listening and engaging in discussion in class there were some other benefits that I was made aware of that I would definitely want in a compensation package. Those include maternity leave, dental/vision, and reimbursement for gas. As I mentioned before I haven’t had the opportunity to weigh benefits of different compensation packages and after engaging in discussion I learned of many more benefits that would be very enticing should I be offered a job. Maternity leave wasn’t some thing that I thought of since that is not the current stage of life I’m in, but one day hopefully will be. And as for reimbursement for gas, growing up in the city of Portland I think that this would be extremely beneficial and something I would really value. On the flipside there are some benefits that I would most likely eliminate. These include disability insurance, life insurance, and child care. For the reason that they’re not applicable to me right now. Meaning if I were offered these in a compensation package right now I would not see them as valuable as the other benefits I had discussed above. However, I could definitely see these being more important to me in the future when they are more applicable to my life. So they are something I can keep in the back of my mind one day if I take a different job and I’m in different circumstances. Some factors that were discussed in the text as well as my own research that impact why an organization would offer certain benefits are based on budget, company culture, and in an effort to attract/retain a certain type of employee. A company would offer certain benefits based on the budget that they have allocated towards offering benefits and if they have the means to provide those to their employees. I also think that the company culture impacts what they offer based on the values of the company as well as how they want to attract/retain certain types of employees. Benefits are extremely valuable in compensation packages and companies have a multitude of reasons why they do or don’t offer certain benefits.

Citation:

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/alter-benefits-attract-retain.aspx

This last summer I worked in a real estate team’s office and it was very interesting to see how compensation affected the effort of different agents. A very highly motivating form of compensation in real estate is commission. Each principal Broker gets to decide how they split the commission with the agent on their team. The more commission they receive on the sale or purchase of the house, the more enticed they are to work harder. Real estate is an extremely self-sufficient job and you have to work for what you want. So this summer I saw many agents accept a listing from clients with a house worth more than others. This is directly correlated with their thought of the commission they can earn off of listing the house. One agent in particular would cherry pick listing appointments at the highest CMA (competitive market analysis). While this is not ethical it was a real world example of how he was driven towards earning the most compensation for his time. I saw commission as an extremely effective compensation strategy in the real world as well as ways that it made people work not as hard if they weren’t receiving as much commission as they would’ve hoped for.