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Compensation Ethics


... to justify favorable compensation for the top executive client. ... MBAO 6600 - Executive Compensation. Ethical Perspectives of Supervisory Pay Decisions ... – PowerPoint PPT presentation

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Title: Compensation Ethics

Compensation Ethics
  • What are Ethics?
  • 1. Are ethics enduring principles that represent
    absolute standards of conduct? Or
  • 2. Are ethics situational standards that depend
    on the context of the situation?
  • What are the implications of accepting one of
    these ethics perspectives and excluding its

Compensation Ethics Perspectives
  • Compensation Policy
  • Supervisory Pay Decisions
  • Employee Conduct involving Pay
  • Ethics of Pay and the Law

Ethical Perspectives of Compensation Policies
  • What should be the basis for appropriate
    comparison firms to determine the worth of the
    executive in the market?
  • What should be the formula for determining stock
    option valuations?
  • Selecting the appropriate central tendency
    statistical measure to compute the firms market
    position compared to competitors
  • Median Mean Weighted Mean

Ethical Perspectives of Compensation Policies
  • Use of Consultants
  • Finding consultants who are willing to justify
    favorable compensation for the top executive
  • The use of consultants who bury contrary opinions
    to those of the top executive.
  • Disclosure of Compensation
  • Disclose procedures and policies for determining
  • Disclose amounts of pay for groups or

Ethical Perspectives of Compensation Policies
  • Rewards for Elite Individuals or Broad-based Pay
  • Stock Options
  • Profit Sharing or short-term bonuses
  • Perks for Top Executives?
  • Company car
  • Large offices, special parking privileges
  • Special retirement and health benefits for
  • Special executive severance policies (golden

Ethical Perspectives of Supervisory Pay Decisions
  • Should squeaky wheels be rewarded? (those who
    complain the loudest)
  • Should employees who are not liked or do not get
    along with others, yet in other respects perform
    effectively, be under-rewarded?
  • Should a manager provide a counter-offer to an
    employee with an employment offer with a higher
    level of pay, if it exceeds that of other
    employees in the same job?

Ethical Perspectives of Supervisory Pay Decisions
  • Should you provide a higher salary offer to hire
    a job applicant who is the best negotiator?
  • Should a supervisor fight harder for a pay raise
    for an employee who is perceived as critical to
    the unit?

Ethical Perspectives on Employee Conduct
involving pay
  • Should an employee embellish his/her resume
    (w.r.t. experience, job skills, etc.) in order to
    receive a higher pay offer in the market?
  • It it Ethical to solicit job offers from other
    employers when your intentions are to use them as
    bargaining chips to receive a better pay offer
    from your current employer?
  • If your intention is to find a better job, is it
    ethical to allow your current employer to make a
    counterbid to retain your services with the

Ethical Pay Practices and the Law
  • Is it Ethical to Deny Contract employees the
    right to have Benefits (health insurance, stock
    options, 401(k) plans, etc.) that permanent
    employees receive?
  • Is it Ethical to use non-compete agreements that
    restrict exiting employees rights to practice
    their skills at another firm?
  • Is it Ethical to re-price stock options for key
    executives but not extend it to other employees
    or shareholders?