CHAPTER 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Chapter

CHAPTER 14 VARIABLE PAY AND EXECUTIVE COMPENSATION

Chapter 14 n VARIABLE PAY AND EXECUTIVE COMPENSATION 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 Human Resource Management, 9 E Mathis and Jackson © 2000 South-Western College Publishing 14 -2

Chapter 14 n VARIABLE PAY AND EXECUTIVE COMPENSATION 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 Human Resource Management, 9 E Mathis and Jackson © 2000 South-Western College Publishing 14 -3

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

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

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION 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 Human Resource Management, 9 E Mathis and Jackson © 2000 South-Western College Publishing 14 -6

Chapter 14 n VARIABLE PAY AND EXECUTIVE COMPENSATION 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 Human Resource Management, 9 E Mathis and Jackson © 2000 South-Western College Publishing 14 -7

Chapter 14 VARIABLE PAY AND EXECUTIVE COMPENSATION Human Resource Management, 9 E Mathis and

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