This document discusses executive compensation and equity theory. It begins by outlining equity theory, which states that an employee's compensation should be fairly balanced with their contributions. It then discusses how executive compensation often violates this, with CEOs in the S&P 500 making 263 times the average employee salary. Researchers recommend the CEO/employee pay ratio be no higher than 20 to 1. The document raises questions about whether government should regulate executive pay and if tying compensation more closely to company performance could motivate employees.

1. PRESENTED BY:
KHURRAM SHAHZAD
KOMAL KHALID
RIZWAN AMEEN
M TAHA AFRIDI

2. 
 Principles of equity theory.
 Executive compensation.
 Comparison with peer groups( other firms of same
industry).
 Critics of executive compensation.
 Researcher Cary Cooper.
 Average S&P 500 CEO.
FACTS OF CASE STUDY

3. 
 In 1963, John Stacey Adams introduced Equity
Theory.
 Adams' Equity Theory calls for a fair balance to be
struck between an employee's inputs (hard work,
skill level, acceptance, enthusiasm, and so on) and an
employee's outputs (salary, benefits, intangibles such
as recognition, and so on).
What is Equity Theory?

4. 

5. 
IN UNIVERSITIES YOU HAVE EVER DONE

6. 
The compensation program serves three main purposes.
 It must attract executives with the skills, experiences, and
behavioural profile necessary to succeed in the position.
 It must be sufficient to retain these individuals, so they do
not leave for alternative employment.
 It must motivate them to perform in a manner consistent
with the strategy and risk-profile of the organization and
discourage self-interested behaviour.
INTRODUCTION TO
EXECUTIVE COMPENSATION

7. 
 Researcher Cary Cooper recommended CEO
Compensation is 20 times the salary of the lowest-
paid employee.
 In an average 500 CEOs are paid 263 times what the
lowest paid labourers makes.
 It is 8 times more than the ratio from the 1950s.
RATIO OF CEO PAY AND
AVERAGE EMPLOYEE PAY

8. 
Q 1. How does the executive compensation issue
relate to equity theory? Who do you think should be
the comparative others in these equity judgments?
What are the relevent input for top executives?
 Executive compensation is a complete opposite
equity theory.
 Ratio being “eight times higher than the same ratio
from the 1950s,”
 If executive compensation can be more closely tied in
with the total revenue of the company for the year
and be more evenly distributed amongst employees,
moral and work efforts should see an increase.
 The executives compare themselves with external
equity, like different organization in the same level
and position.

9. 
Q 2. Can you think of procedural justice implications
related to the ways pay policies for top executives have
been instituted? Do these pay-making decisions follow
the procedural justice principles outlined in the
chapter?
 No, the procedural justice implications related to the
ways pay policies for top executives have not been
instituted.
 The pay-making decisions do not follow the
procedural justice outlined in this chapter.
 The executive packages are determined by the board
of each company.
 The procedure to determine and executive pay is not
in place and there is no transparency in the policy.

10. 
Q 3. Do you think the government has a legitimate
role in controlling executive compensation? How might
we use distributive and procedural justice theories to
inform this debate?
 NO, The government can not have control over
private company’s executive compensation.
 The distributive justice is associated with fair
distribution of resources and outcomes decisions.
However, the distribution of the resources in terms
of stock options is directly proportional to amount of
pressure and work that an executive needs to handle.
 Intervention of the government will only act like a
demotivation.

11. 
 Q 4. Are there any positive motivational
consequences of trying compensation pay closely to
firm performance?
 Yes, there are few positive motivational
consequences of tying compensation pay closely to
firm performance.
 Organization-level incentives basing on the firm’
performance can motivate employees to align their
activities with that of the organization's goals.

12. 
 As per the case study the CEO’s should be given
compensations on the basis of their performance rather
then there status.
 In past there are cases where the CEO’s of big company
has been paid high instead of their weak performance.
 The best way to deal with problem should be that, the
“Employee evaluations”. If employees are granted the
power to evaluate their fellow employees, then the system
will typically be viewed in a fair and favourable manner.
And the conflict can be resolved.
CONCLUSION

13. CASE INCIDENT 1
UNDERCOVER BOSSES

14. 
 Some of industry are failed in implementing their
strategy or failed in communicating the policy of top
level management to their employee due to different
perspective on how to achieve company goals in
their company.
 The leader is not understand well the day to day
operation of their employee.
 Come a new concept of MBWA which has benefit
and failure potential on its implementation
CASE BACKGROUND

15. 
Q1. What are some of the things managers can learn
by walking around and having daily contact with line
employees that they might not be able to learn from
looking at data and reports?
 They can understand how difficult many of the jobs
in their organization, and they can now how much
skill was required to perform even for the lowest
level tasks.
 Experience taught them a lot to make a new
improvement and sparked idea for their company.

16. 
Q2. As an employee, would you appreciate knowing
your supervisor regularly spent time with workers? How
would knowing top executive routinely interact with line
employees affect your attitude toward the organization?
 Yes, we would appreciate it if our supervisor spend
time and listen our complain and ideas.
 As an employee of course we feel appreciated knowing
that our managers care about us and this will motivate
employees to do their best at work.

17. 
Q3. What ways can executives and other
organizational leaders learn about day to day business
operations besides going “undercover?”
The company can make several company trips
such as :
 MBWA Management Practice
 Company Gathering
 Playing sports games
 Family Day

18. 
Q4. Are there any dangers in the use of a MBWA
strategy? Could this strategy lead employees to feel
they are being spied on? What actions on the part of
managers might minimize this concerns?
 Yes, there are some of dangers potential of MBWA
strategy. It will make the employee to feel they are
being spied on. And to minimize the problem, the
managers have to be friendly and open minded. So
there's no misunderstanding between the employee
and managers.

19. 

20. THANKS FOR
YOUR ATTENTION
&
GOOD LUCK
FOR UPCOMING
PRESENTATIONS