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Management and Organizational Studies
Management and Organizational Studies 1021A/B
James O' Brien

HR Lecture 5 - Compensation CEO compensation - Are CEOs being paid too much? - Median CEO compensation in S&P 500 was 9M in 2010; profits rose 41% - Pay for workers grew 3% in 2010, twice the rate of inflation o However, average wage was less than 0.5% of what the typical CEO made - Considerations: o Markets – firms compete for CEO talent o Shareholders can veto Board’s plans at AGM? o Attributions for firm performance – what are the drivers? Whose fault is that when your team doesn’t win the cup? o Theories of the firm – maximize shareholder wealth? Role of social responsibility? - Growth in top 1% income earners is much more pronounced than the rest for past 30 years Question: when you graduate from Western, how much do you expect to be paid on your first job? - Equity theory – observe other people to see how hard they work and see how much they receive for that work; ratio between inputs and outputs compared between self and reference groups; look at data - What’s the nature of the work? Intensity? - What’s the balance of compensation and benefits? - Time value of money – get paid the same from year to year but buy less Big Macs! - Our data is convenience sample o Estimate, about 3-4 years into the future so there is uncertainty o Ambigu
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