Essay - Executive Compensation the Role of Compensation in Organizational Behavior is...

Executive Compensation

The role of compensation in organizational behavior is an important one as it ***** used as a key tool by management to achieve social control over its employees (Pfeffer, 1997, p.102), the primary ********** being that ***** packages affect attitudes and behavior. This is seen as particularly true of executive level compensation on ***** grounds ***** management must be sufficiently motivated if ***** objectives are to be met and so that, they in turn, succeed in motivat*****g the rest of the organization: "Because ***** the importance of money ***** a motiv*****tional factor, the compensation function ***** quite sign*****icant. Its performance involves developing a philo*****phy of what wages should be; developing theories as to the source of wages...relating compensation to individual jobs; arriving at ***** differentials in pay...." (Megginson, 1972, p. 50)

Though ***** may undeniably be an ***** *****, several research studies have shown that ***** ***** ***** compensation ***** vary within the context of markets, organizational or individual **********. For instance, the role of compensation in attracting and retaining ***** and management talent w***** seen to increase in ***** in the tight labor market of 1996-97 when wages and salaries grew at a p*****ce not seen in many years. In addition, ***** increasingly competitive business environment ***** the last few decades has necessitated that organizations control labor costs, while focusing simultaneously on increasing productivity, quality, and enhanced customer service. Other trends such as flatter organization structure, more fluid organizational design have also required new strategies for employee *****, particularly ***** employee compensation is deemed to be critical ***** financial success (Schuster).

The impact of environment on organizational behavior is evident given research, which shows that a typical CEO in the U.S. earned total compensation that was around 35 times the pay of an average m*****ufacturing worker in 1974, as compared to ***** 120 ***** 150 ***** that of an average worker ***** the manufacturing and *****s sector in ***** late 1990s. This is attributed to the changing ***** for corporate control, changing size d*****tribution of firms, changing wage dispersion ***** *****, ***** dramatic changes in the governance ***** employment relations (Pfeffer, *****, p. 23). Changes ***** ***** level compensation of this magnitude have largely risen due to the emergence of high per*****mance, high commitment work systems (Schuster). A*****her basic dimension of this trend is the growing emphasis on variable pay or pay that changes depending on ***** perf*****mance (or skill) ***** the individual, w*****k group, or organization (*****, 1997, p. 104).

The dominance of the economic model of behavior in ***** United States is seen as the underlying basis of the importance given ***** ***** ***** of ***** in *****fluencing *****. However, research *****, which have tried to establish a correlation between executive level pay and organizational performance, reveal ***** the link is, at best, a tenuous one. This is ***** true of CEO compensation *****, ***** seem to be more determined by company size, and a complex process shaped by ***** political, economic and social fac*****rs.