Case illustration - Questions

578

Appendix A / Critical Thinking Applications

Dear Dr. Boseman:

The purpose of this letter is to request an assess-

ment of my salary in the context of my performance

and responsibilities and the salary levels that have

been set for three staff members recently hired by the

Counseling Center. In the past year, the Center hired

one male Ph.D. at $10,000 more than I earn and two

unlicensed counselors (both male) at almost my identi-

cal salary rate.

I believe my salary is extremely low given the

following facts: (1) My job performance has been

rated at the highest level for all six years I have been

on staff; (2) the recently hired Ph.D., a male, had no

experience and performs the identical work I perform;

(3) the recently hired M.Ed., a male, who is paid at the

same level as I, had no experience in counseling. As

you know, with the exception of the referrals to which I

refer below, assignments of clients to staff members are

based strictly on space available and not the possession

of a particular staff member’s credentials.

While I recognize that credentials do translate into

higher salaries for persons performing identical work,

so too do other credentials such as the possession of an

applicable license and qualifications and experience in

supervising graduate student interns. I receive no ad-

ditional compensation for this license despite the fact

that it enables me to supervise interns while the two

Master’s level associates hired do not possess such a

license and thus cannot (and do not) supervise students.

I have supervised graduate students since 1997. In ad-

dition, I have a Master’s in Social Work (MSW), a ter-

minal degree that, as a credential, has far more external

marketability than the degrees possessed by the two

new hires.

I am also the designated specialist who receives all

referrals from the county regarding sexual assault and

rape. I have had to use my expertise in this highly sensi-

tive area on several occasions.

Rational (and legal) compensation systems set and

adjust pay levels based on a number of factors, including

the credentials, experience, supervisory responsibilities,

and, of course, the job performance of the incumbents.

Based on these factors, my salary is difficult to explain,

especially when compared to the new staff of the

Counseling Center.

Thank you for considering these issues. I look

forward to your response. Ms. Julia Kate

Assignment Write a one-page position paper. Is this a violation of the

EPA? What about a Title VII violation? Does Ms. Kate

have a case? If Dr. Boseman feels Ms. Kate has an EPA

case, can he reduce the pay of the newly hired PhD to match

Ms. Kate’s salary to erase the problem? Does it matter

that the Counseling Center hired the male PhD 8  months

ago? If so, how is this relevant in a Title VII claim? If

you cannot take a position on the allegations, stipulate

what specific additional information you need to reach

a conclusion. The legal implications aside, what should

Dr. Boseman do?

financial consequences if their behavior (or lack of it)

hurt their firm. Liability insurance for this provision

is now available. To what extent does insuring

against “clawback” subvert the point of the law?

Conduct research on the law and determine

whether there are any new studies that have assessed

the effects of the new law. Section 954 of the Dodd-

Frank Act requires national securities exchanges

(meaning, for instance, the NYSE, Amex, and

Nasdaq) to adopt rules as directed by the SEC. The

rules will require issuers to develop and implement a

policy providing for disclosure of an issuer’s policy

on incentive compensation that is based on financial

information required to be reported under securities

laws, and that, if an accounting restatement is

prepared, the issuer will recover any excess incentive-

based compensation from any current or former

executive officer who received such incentive-based

compensation in the 3 preceding years.

4. Should “say on pay” be mandatory for all executive

pay packages? Should corporate boards alone

continue to make decisions with respect to executive

pay packages or should consent of a majority of

shareholders be required? Suggest one or two

advantages and disadvantages.

5. Do you agree with the recommendation to require full

disclosure regarding pay consultants? Explain your

answer.

6. What about the argument that CEO pay is no more

out of line than the compensation of movie stars or

star athletes?

*Contributed by Harry Schwartz and John Bernardin.

1 Crystal, G. (1991). In search of excess (p. 3). New York, NY: Norton. 2 Retrieved from http://www.aflcio.org/corporatewatch/paywatch/ ; See also,

Morgenson, G. (2011, June 18). Paychecks as big as Tajikistan. The New York Times online. 3 Rich, F. (2010, March 21). Obama, Lehman and ‘The Dragon Tattoo.’ The New York Times on line. http://www.nytimes.com/2010/03/21/opinion/21rich .html?scp=1&sq=Obama,%20Lehman%20and%20%E2%80%98The%20

Dragon%20Tattoo%E2%80%99%20&st=cse

4 Bebchuk, L., Cohen, A. & Spamann, H. (2010). The wages of failure: Executive

compensation at Bear Stearns and Lehman 2000–2008. Yale Journal on Regulation, 27, 257–282. 5 Retrieved from http://www.accountingobserver.com/Reports/tabid/59/Default

.aspx S.&P. 500 Executive Pay: Bigger Than . . . Whatever You Think It Is

6 Morgenson, G. (2009, August 15).The Quick Buck Just Got Quicker. The New York Times on line. http://www.nytimes.com/2009/08/16/business/16gret .html?pagewanted=all

7 Equilar (2010). 2010 Clawback policy report: An analysis of compensation recovery policies at Fortune 100 companies . Available at www.Equilar.com . 8 Finger, R. B. (2011, October 25).Why America’s highest paid CEOs are insanely

overpaid. http://www.forbes.com/sites/christopherhelman/2011/10/25/why-

americas-highest-paid-ceos-are-insanely-overpaid/

9 Ibid.

Critical Thinking Application 10-B

Illegal Pay Discrimination, Bad Pay Policy, or Both? The following letter was written by Ms. Julia Kate, a female

associate, and addressed to the director of the clinical

counseling center.

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