ASSIGNMENT #1

CASE INCIDENT 1 it’s Not Fair

COURSE

Industrial psychology

GROUP MEMBERS ROLL NO

AREEBA NISAR 009
IQRA KAMIL 019
SUMMAYA JAVED 063
MINAL ZAHRA 031
LUVEEZA MALIK 055
ZARAFSHAN MUMTAZ MALIK 068

SUBMITTED TO: MS.RUBAB

SUBMITTED ON: 9th March, 2021
Case incident 1 It’s Not Fair

CASE INCIDENT 1 it’s Not Fair

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Case incident 1 It’s Not Fair

QUESTION #1

How does the executive compensation issue relate to equity theory? Who do
you think should be the referent others in these equity judgments? What are
the relevant inputs for top executives?
Executive compensation is typically determined
by the equity theory depending on the referent
others to which the Corporate is compared. The
comparative should be those in similar positions
in similar company set ups, as the article
indicated when boards find comparative
companies equate the CEOs’ salaries to each
other. Board of a company should not only use this comparison but also take into account and
make sure that the employee satisfaction rate is also high. If it is not, then an internal re-
evaluation is needed in determining the CEO’s salary. If they are not taking care of their
company, then their salary should not be equal to one’s company that does. The company can
certainly be pressured by boycotts, strikes and the like but in the end if the company is making
good money and treats the employers and consumers well it probably won’t happen regardless of
what they make. Most people find high rates of pay for a CEO acceptable as long as those things
are met, somewhat similar to how an employee feels to their own pay as long as needs are met
and they are treated well.

Fairness and equity are the two most important key elements for to make the employee get
motivated .The equity theory deals with comparison of individuals’ inputs and outcomes with
others and influences them to eliminate the inequities between them. It mainly focuses on the
distributive justice that how an individual will receive reward from the management .The top
management of large firms with similar type of large firms and smaller firms with similar type of
smaller firms are comes under referent others in these equity judgments.

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Case incident 1 It’s Not Fair

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
No, the procedural justice
implications related
to the ways pay policies for
top executives have not been
instituted. The pay-making

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Case incident 1 It’s Not Fair

decisions do not follow the

procedural justice outlined in
this chapter. The executive

QUESTION # 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?

The implications of procedural justice compared to pay policies of top executives have, is based
on individual prospective. Where one person can be basing their wages off of their needs to
sustain their current life style, another could be basing it off of their peers and what they believe
to be true about their worth in a company. I believe that you have to take procedural justice as
one piece in the wheel that drives pay making decisions. It does help when the company as a
whole works together in establishing said procedures. As shown in the text, employees perceive
that procedures are fairer when they are given a say in the decision-making process.

QUESTION # 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?

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Case incident 1 It’s Not Fair

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
No, the procedural justice
implications related
to the ways pay policies for
top executives have not been
instituted. The pay-making

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Case incident 1 It’s Not Fair

decisions do not follow the

procedural justice outlined in
this chapter. The executiv The
executive packages are determined by the board of each company and not all companies disclose
the executive packages. Also some organizations provide stealth executive pay which includes
executive pensions, deferred compensation, perquisites, and severance arrangements. The
procedure to determine and executive pay is not in place and there is no transparency in the
policy.
As a personal opinion, government does not have a legitimate role in controlling executive
compensation. The distributive justice is organizational setup is the fairness associated with
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.

QUESTION # 4

Are there any positive motivational consequences of tying compensation pay

closely to firm performance?

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. Organizational-Level
incentives will encourage employees to contemplate more like stakeholders, taking a broad view
of what is required from their end in order to make the organization more effective. In case of
procedural justice, a transparent policy on executives' compensation is not followed. While the
organization has policies laid down for compensating its employees, however such policies lack
in case of executive compensation. Government intervention wouldn't be required; however it
could instruct it in following certain guidelines throughout the organization.

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