Case Study 3

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Running head: CASE STUDY 3 1

CASE STUDY 3 1

Abstract

The human resource manager, Don, is tasked with analyzing the compensation package of the CEO and ensuring fair pay to all employees. The factors that outline this pay structure are all vital importance when determining the compensation structure. The staff seen on the front lines are important to the organization but retaining the CEO is a great determining factor in the success of an organization. The CEO has a higher chance of remailing with the company if they are offered a competitive compensation package.

There are numerous segments that make up the director of human resources responsibilities. For this company, these responsibilities lie on Don, who must create the executive pay structure and condense each component. Don needs to gather further information to correctly determine the effective pay rate for the company’s CEO. The best solution for Don is to use the three best hypotheses to depict the procedures identified with setting official remuneration: office hypothesis, competition hypothesis, and processes used in creating executive compensation. These three theories are described by author Marticchio (2017) as the agency theory, tournament theory, and social comparison theory.

If Don were to utilize the agency theory, he would consider pressuring the COE’s proprietorship within the company. If Don chose to make the pay package through the social comparison theory gathering details on the market rates for similar industries is a must. With this theory, Don can also determine any parts of the CEO’s salary that is performance based and use those numbers to show how the CEO is adding success to the company. Though the company may be in a financial bind, this information can give detail into how the CEO is leading the company to a better future.

As the head of HR, Don must steer between implementing the best practices for the CEO's compensation plans or tweaking the compensation to line up with the objectives to of the investors (Hou, Priem, and Goranova). It is normal that Don will come across bothersome instances regarding the CEO’s pay structure and whether it is the more fair or logical decision. This HR executive has the best chance to create an excellent compensation package that all parties would agree on by detailing the pay contrasts directly to the Oakwood workers and featuring the connection that the pay structure has based on the CEO’s performance. By explaining the abilities, skills, and knowledge the COE must bring into his role, it will be better understood that his higher pay is justified. This pay structure works so well because the CEO only benefits when the company grows and gains in profits (Brisker, Colak, and Peterson, 2014). Offering the employees some examples of commitments and achievements the CEo has performed will provide background into how the CEO will further the company and create opportunities for everyone.

Don’s main goal is to not only provide the company with a compensation package for the CEO but to ensure all employees and shareholders are aware that the salary is performance based and therefore fair. Since 2007-2008, CEO pay has drawn a lot of consideration and examination from scholastics, controllers and the overall population (Harper and Zin, 2016). Numerous researchers have inquired about the disparity of CEOs pay contrasted with employees in the same company. Researchers were unable to determine that pay was considered fair in their studies even after they took into consideration all the variables such as size of the organization, business alliances, and macroeconomics conditions (Gupta and Wowak, 2017). The conflicting discoveries on the degree to which CEOs are compensated or penalized because of their organizations' accomplishments have been a specific source of contention (Gupta and Wowak, 2017). Most of the workers will not be responsible for the company’s achievements in a similar way as the CEO, however the CEO may still get exponentially more salary. The wage package for the CEO of a business is intended to compensate the CEO for driving the organization toward a path of success, but if the CEO settles on choices that will cost the association assets they should be docked in their pay and not offered a commission.

Overall, Don needs to uncover the best technique to disclose the compensation differences to the employees who work under the role of CEO as well as to the shareholders. One methodology he could use in characterizing how the pay package is made would be to weigh all components including commission, vacation days, and retirement benefits when determining the actual salary amount to be provided. It is important for all parties involved to remember that pay for a CEO will be unique in relation to other top officials because the CEO is the person that all company accomplishments or failures will fall onto.

Market-based speculations anticipate that differences in a CEO’s abilities lead correlates to a higher amount of pay (Falato, Li, and Milbourn, 2015). While there is little room to maneuver when it comes to benefits, as all employees will receive similar benefits, there is plenty of opportunity to compensate the CEO in a higher salary than other executive employees.

The main purpose on Don’s position is to compile the information and reasoning used to create an effective compensation package for a company’s CEO. Through taking consideration of fair pay for all employees as well as benefits offered, he can build a pay structure that is suitable for the stockholders. To maintain retention when it comes to the company’s CEO it is likely best that the pay is offered on a performance-based regimen, guaranteeing the best possible results for the company. Given the amount of responsibilities that a CEO is garnished, Don must provide a competitive compensation package to offset the work. Through Don’s work, the company will be able to hire a CEO that leads the company forwards and creates business and profits.