This reflection paper analyzes Citigroup Inc’s initiatives to set funds aside for executives’ performance pay, how they are interacting with the media, and business tools that could improve the transparency of their compensation system. Citigroup is a global bank with its headquarters in New York, NY (Citigroup, Inc., 2011). Citigroup received a U.S. government bailout two years ago (Hester, 2009) and has been operating strongly since then.
This June Citigroup announced that it will be putting 86 million for the quarter into paying bonuses to key executives. The announcement was made by Citigroup’s company spokesman Jon Diat (Scheer & Eichenbaum, 2011). The mandatory regulatory filing was filled out to where it addresses the possible recipients of the bonuses as merely ‘key’ employees—no names were given and the number of possible recipients was withheld as classified information (Scheer & Eichenbaum, 2011). A few possible recipient names were revealed to the media.
Citigroup’s (Citi) compensation beliefs are good because they understand that executives need to be financially recognized for their achievements. The following quote is an example of how companies can fail to financially recognize employee’s achievements. “An employer may not fire a worker if this would violate an implied contract, such as a verbal promise, or basic rules of ‘fair dealing.’ For example, an employer could not legally fire a salesperson just because he or she had earned a bigger bonus under an incentive program than the employer wanted to pay” (Lawrence & Weber, p. 369, 2011).
The quote above explains how a company can set up a compensation system and then fire employees that successfully reach the top pay within that compensation system. Executives may experience similar treatment from stockholders, with the exception that stockholders do not create the compensation system. Stockholders can exude massive public ridicule. If a corporation accepts the criticism of stockholders and organizations they may be viewed as wanting to fire the executive that has accomplished preset goals.
Citi is keeping the some of the profit-sharing candidates’ names confidential. An important aspect of protecting the interest of stockholders is to keep the company as transparent as possible (Lawrence & Weber, 2011). Citi should reveal all names of the executives that may earn bonuses from the profit-sharing programs. Investors may want to know about who is and is not a part of the profit-sharing program; they may also want to know why the participants’ names are being kept confidential.
The emergency rescue of the Royal Bank of Scotland in 2008 has cost the UK government thus the British taxpayer a huge amount of money. Many people are upset about the high bonuses the RBS management board have received, both because of the outrageously high amount and because the performance of the bank on the long-term was not good at all. According to the agency theory managers do not always act in the interest of the shareholder, but often act in the interest of themselves. The downfall of RBS could have been prevented if managers were not paid out a bonus based on their performance of one year, but rather a combination of a bonus based on their performance of multiple years and a bonus ...
Ally Financial Inc. is an independent financial firm that was founded in 1919. They are a leading automotive financial company, provide mortgages and other commercial financing and also became a bank holding company in December 2008. Ally Bank is a subsidiary of Ally Financial and raises deposits from customers through the internet, over the phone and through mobile applications. As a direct bank, Ally does not have any bank branches and strives to grow its business through direct channels (internet, phone, mail, and mobile). The percentage of customers who prefer to do banking via direct channels has increased by 41% between 2007 and 2012, while the number of people who prefer traditional branch banking declined by 21%.
Capital One uses IT through its information-based strategy (IBS) to “record, organize, and analyze data on the characteristics and behaviors of their customers,” as stated by CEO Richard Fairbank. Their philosophy was to exploit information by constructing scientific models that could be used to both assess the creditworthiness of potential cardholders through FICO scoring, and to customize product offerings for existing ones. This was done through data mining, sorting, customizing offers and marketing campaigns, and then analyzing this data to see what campaigns worked – for what reason and what it returned in revenue and profit generation. This differs from other financial institutions in that these other institutions were compiling data manually, accepting applicants based upon debt-income ratios and were all charging the same interest rate and annual fee.
In April 2010, KK BB, the CEO of Marshall & Gordon, a leading public relations firm met with the firm’s leadership committee off-site in Miami. This off-site brought together Marshall & Gordon’s executive committee, practice and regional heads, and senior HR officers to discuss on redesigning the firm’s compensation system. A global advisory taskforce, under the direction of an external consulting firm, had spent three months collecting and analyzing data. Marshall & Gordon hired external specialists to design the new performance management program. The specialists proposed that the senior managers and human resource form a global advisory unit together with Marshall & Gordon partner to represent the firm’s five regions of the firm and lead the design process. The advisory unit surveyed all consultants in February in order to understand their way of thinking about the fairness, worth, and effect of the current performance management system. Majority of the interviewees responded to the corporate surveys implying that the subject was topic was especially exciting to them. Interviews gave insights on present and prospective business plans and direction. The survey also showed that specific focus across certain employee populations should be given. Six current hires from key competitors were also interviewed to comprehend competitor pay practices and compensation program structures. Further focus groups discussions and key information interviews enabled the taskforce’s to understand the needs of certain groups within Marshall & Gordon’s worker population. The survey culminated with the taskforce conducting interviews of 20 partners and principals togeth...
At the heart of the bailout outrage was a sense of injustice. Even before the bonus issue erupted, public support for the bailout was hesitant and conflicted. Americans were torn between the need to prevent an economic meltdown that would hurt everyone and their belief that funneling massive sums to failed banks and investment companies was deeply unfair. To avoid economic disaster, Congress and the public agreed. But morally speaking, it had felt all along like a kind of extortion. The two possible reasons the public thought the executives receiving the bonuses didn’t deserve them are — greed & failure.
CEO compensation has been a heated debate for many years recently, and it can be argued that they are either overpaid or that there payment is justified by the amount of work they do and their performance. To answer the question about whether CEO compensation is justified it must be looked at by the utilitarian viewpoint where the good of many outweighs the good of one. It is true that many CEO’s are paid an exorbitant amount of money; however, their payment is justified by the amount of money that they bring back to the company and the shareholders. There are many factors that impact the pay that the CEO receives according to Shah et.al CEO compensation relies on more than just the performance of the CEO, there are a number of factors that play a rule in the compensation of the CEO including the fellow people who help govern the corporation (Board of Directors, Audit Committee), the size of the company, and the performance that the CEO accomplishes (2009). In this paper the focus will be on the performace aspect of the CEO.
Scarpello, V., & Jones, F.F. (1996). Why justice matters in compensation decision making. Journal of Organizational Behavior, 17, 285-299.
The fast food industry is one of the highest grossing employer in the nation. Its compensation strategy has been on the forefront of many debates and the discussion of employee dissatisfaction. Such disparity in compensation has prompted nationwide protest of workers and garnered attention from policy makers, media outlets and stakeholders. Much of the outcry has focused on CEOs being paid lucrative salaries while the front line workers’ wages are at or slightly above the poverty level. As the dilemma continues to unfold in the media, compensation plans continue to play an enormous role in the recruitment and retention of workers.
Many of Harrah’s employees deemed the goals set by Winn’s current incentive program to be unrealistic; on the other hand, others felt a sense of entitlement for bonuses. Therefore, Winn’s job is to provide a recommendation to Gary Loveman, on how to motivate and get employees energized. In order to motivate the employees, Winn had implemented an incentive pay plan to rewards Harrah’s employees in all of its properties for improving customer service. The company’s purpose for incentive program was to implant a competitive mindset in its employees as well as to show the employees that they are core of the...
Johnson, Sam T. "Plan your organization’s reward strategy through pay for performance dynamics: Compensation & Benefits Review 30, Number 3: (May/June 1998): 67-72
...e “ The reward system of the organisation guides the actions that generally have the greatest impact on the motivation and performance of individual employees”. Similarly, Wah (2000) argues that companies which treat their high-performing employees significantly better than those that don't are the best-performing companies around and they reside in the upper quartile of shareholder returns. In addition Lawler (as cited in, Readings In Contemporary Employment Relations, 1998) states that if all the psychological rewards are removed employees will grudgingly remain at work, however if all the financial rewards are removed they would most likely leave.
Employee compensation and reward systems have undergone a couple of paradigm shifts since inception. Reward systems were traditionally compensation based and focused on the individual or the position (Beam 1995). After a recession in the early 1980's, employers turned to performance based models in an attempt to save money while still rewarding top performers (Applebaum & Shapiro, 1992). Today, the most successful organizations are using a total reward model, a hybrid of the performance based model combined with strategic human resource management planning to create reward systems that both benefit the employee and help organizations realize their operational goals (Chen & Hsieh, 2006).
In large organisation, competition is not only in the market for goods and services but also for the quality of employees. As such, a large organization can only become attractive to the most skilled and high quality workers if it has an effective compensation and benefit plan. The key purpose of an effective compensation and benefit system is to provide employees with the right rewards for their work and right behavior in the workplace. Typically, organizational success is determined by the quality of employees an organization has. In turn, the organization can only attract such quality workers and maintain them through effective compensation and benefit
There is considerable debate over merit pay and the effect it has on employees within an organization. Psychologists believe merit pay is related to the incentive theory of psychology; people respond to rewards and with the proper motivation, it increases performance (Cherry). Employers consider merit pay an effective tool and a form of competition strategy for motivating employees to achieve positive performance outcomes. Many employers ignore the fact that incentive plans may motivate some individuals while others have high work ethics and do not need motivation. The intent of this paper is to discuss merit pay used by companies, the motivational factors on employees to reach high achievement, and the challenges that employees face due
Organizations are working hard in today’s world of business, not only to remain competitive, but also to focus on stability and structure. Employees are the backbone of an organization. It is becoming more important to offer quality HRM programs to staff, in order to support the retention of trained and experienced staff. Employees have always been concerned with salary however, there is a new focus emerging that looks at compensation as a whole entity. Monetary wages are now just as important as other benefits such as paid time off, medical and dental offerings and retirement. This paper will discuss the importance of the total compensation program which includes many aspects, not just salary. Attention must be paid to equal pay, pay