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
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