CHAPTER 14 VARIABLE PAY AND EXECUTIVE COMPENSATION

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-2 n Objectives   Define variable pay and give examples of three types of variable pay   Identify four guidelines for successful incentive programs   Discuss three types of individual incentives   Explain the three different ways that sales employees typically are compensated   Identify key factors that must be addressed when using team variable pay plans   Discuss why gainsharing, profit-sharing, and employee stock ownership plans (ESOPs) have grown as organizational incentive plans   Identify the components of executive compensation and discuss criticisms of the reasonableness of executive compensation

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-3 n n Variable Pay: Incentives for Performance   Types of variable pay   Successes / failures of variable pay plans   Guidelines for variable pay plans   Recognize organizational culture / resources   Make pay plans understandable   Keep plans current   Tie variable pay to desired performance   Recognize individual differences   Identify variable pay separately from base pay

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-4 n n Individual Incentives   Piece-rate systems   Bonuses   Special incentive programs   Incentive program awards   Recognition awards   Service awards

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-5 n n Sales Compensation and Incentives   Sales performance and measurement   Sales compensation plans   Salary only   Straight commission   Salary plus commission or bonuses

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-6 n n Team-Based Variable Pay   Types of team incentives   Distributing team incentives   Timing of team incentives   Decisions about incentive amounts   Problems with team-based incentives   Successful team-based incentives

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-7 n n Organizational Incentives   Gainsharing   Payment and performance measures   Success in gainsharing   Improshare   Scalon plan   Rucker plan   Profit sharing   Objectives   Drawbacks   Employee Stock Ownership Plans (ESOPs)   Establishing an ESOP   Advantages / disadvantages   Financial Accounting Standards Board (FASB) rules on ESOPs

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-8

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-9 n n Executive Compensation   Elements of executive compensation   Executive salaries   Bonus plans   Performance incentives   Benefits for executives   Executive perquisites   Board of director’s role with executive compensation   Board compensation committee   Board member’s compensation   Reasonableness of executive compensation   Organizational performance and executive compensation   Criticism of executive compensation

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9E Mathis and Jackson © 2000 South-Western College Publishing 14-10