Costco Wholesale CEO Keeps Executive Pay Equitable John Pierpont Morgan, who in the 1800s founded

the financial giant now called J.P. Morgan Chase, warned that no CEO should earn more than 20 times
an average worker’s pay. That advice didn’t stop James L. Dimon from earning an average of $40 million
in total compensation for each of his first two years as the current CEO of J.P. Morgan Chase. Dimon
took home more than 1,200 times the pay of the average employee in the United States. Costco
Wholesale chief executive Jim Sinegal (shown in photo) thinks such a large wage gap is blatantly unfair
and can lead to long-term employee motivation problems. “Having an individual who is making 100 or
200 or 300 times more than the average person working on the floor is wrong,” says Sinegal, who
cofounded the Issaquah, Washington, company. Even though Costco is one of the world’s largest
retailers, Sinegal’s annual salary and bonus usually amount to less than $600,000. Stock options raised
his latest total compensation to $3.2 million, which was much less than Costco’s board wanted to pay
him. Sinegal explained that receiving higher pay would not affect his motivation and performance. At
the same time, Costco employees enjoy some of the highest pay rates in the retail industry (averaging
$17 per hour).81

Procedural Justice Recall that procedural justice refers to fairness of the procedures used to decide the
distribution of resources. How do companies improve procedural justice? 82 A good way to start is by
giving employees “voice” in the process; encourage them to present their facts and perspectives on the
issue. Voice also provides a “value-expressive” function; employees tend to feel better after having an
opportunity to speak their mind. Procedural justice is also higher when the decision maker is perceived
as unbiased, relies on complete and accurate information, applies existing policies consistently, and has
listened to all sides of the dispute. If employees still feel unfairness in the allocation of resources, their
feelings tend to weaken if the company allows the employee to appeal the decision to a higher
authority. Finally, people usually feel less inequity when they are given a full explanation of the decision
and their concerns are treated with respect. If employees believe a decision is unfair, refusing to explain
how the decision was made could fuel their feelings of inequity. For instance, one study found that
nonwhite nurses who experienced racism tended to file grievances only after experiencing disrespectful
treatment in their attempt to resolve the racist situation. Another study reported that employees with
repetitive strain injuries were more likely to file workers’ compensation claims after experiencing
disrespectful behavior from management. A third recent study noted that employees have stronger
feelings of injustice when the manager has a reputation of treating people unfairly most of the time. 83
Costco Wholesale CEO Keeps Executive Pay Equitable John Pierpont Morgan, who in the 1800s founded
the financial giant now called J.P. Morgan Chase, warned that no CEO should earn more than 20 times
an average worker’s pay. That advice didn’t stop James L. Dimon from earning an average of $40 million
in total compensation for each of his first two years as the current CEO of J.P. Morgan Chase. Dimon
took home more than 1,200 times the pay of the average employee in the United States. Costco
Wholesale chief executive Jim Sinegal (shown in photo) thinks such a large wage gap is blatantly unfair
and can lead to long-term employee motivation problems. “Having an individual who is making 100 or
200 or 300 times more than the average person working on the floor is wrong,” says Sinegal, who
cofounded the Issaquah, Washington, company. Even though Costco is one of the world’s largest
retailers, Sinegal’s annual salary and bonus usually amount to less than $600,000. Stock options raised
his latest total compensation to $3.2 million, which was much less than Costco’s board wanted to pay
him. Sinegal explained that receiving higher pay would not affect his motivation and performance. At
the same time, Costco employees enjoy some of the highest pay rates in the retail industry (averaging
$17 per hour).81 156 Part Two Individual Behavior and Processes Consequences of Procedural Injustice
Procedural justice has a strong influence on a person’s emotions and motivation. Employees tend to
experience anger toward the source of the injustice, which generates various response behaviors that
scholars categorize as either withdrawal or aggression. 84 Notice how these response behaviors are
similar to the fight-or-flight responses described earlier in the chapter regarding situations that activate
our drive to defend. Research suggests that being treated unfairly threatens our self-concept and social
status, particularly when others see that we have been unjustly treated. Employees retaliate to restore
their self-concept and reinstate their status and power in the relationship with the perpetrator of the
injustice. Employees also engage in these counterproductive behaviors to educate the decision maker,
the