https://www.wsj.com/articles/are-you-underpaid-in-a-first-u-s-firms-reveal-how-m

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https://www.wsj.com/articles/are-you-underpaid-in-a-first-u-s-firms-reveal-how-much-they-pay-workers-1520766000?mod=searchresults&page=1&pos=1

WSJ - Are You Underpaid?

•WSJ Article – Theo Francis and Vanessa Fuhrmans March 12, 2018

•Companies are disclosing how much they pay the rank and file, and how that stacks up to the CEO, resulting in some surprises – including an oil chief who makes 935 times the salary of his median employee.

•Compensation information disclosure has implications for employee satisfaction and motivation. Employees are motivated by equity of pay across an industry and job. Significant differences in the pay within a company compared to other companies or between lower level employees and senior leaders creates tension and dissatisfaction inside an organization. This article discusses the impact of the recent pay gap disclosure.

QUESTIONS TO BE ANSWERED (TWO PARAGRAPH FOR EACH QUESTION)

1.Why are companies revealing the pay gap between the CEO and the median employee?

2.What are the implications of the pay gap information? What are the benefits and issues?

3.How are organizations managing the disclosure of the pay information? How does this information impact employees and motivation?

Explanation / Answer

1. Why are companies revealing the pay gap between the CEO and the median employee?

Dodd-Frank Act, 2010 made it mandatory for corporations to disclose the employee pay. Corporate scandals and financial crisis 2008-09 made it necessary to better understand employee pay practices especially that of top management and CEOs

Companies revealed such information so that investors can understand how they are paid and why some are paid more. Both investors and employees can compare the pay across the sector. This also shows how companies are paying compared to their peers in the sector

Companies also use this to shows how they are paying to keep up with global competition for talents at each level. Small companies use this leverage to attract talent pool by showing how they pay well compared to industry big players. This also brings in accountability, transparency and brand reputation for the company

2.What are the implications of the pay gap information? What are the benefits and issues?

Now investors and employees have access to employee across the company in different regions. They also get to know about the pay across the sector and pay for the same job(e.g. accountant) in different sectors. They also get to know the level of pay group among different levels in any organization

.This will benefit the investors to keep a tab on CEOs- corporate governance. This will also help them to understand how other employees are paid and whether the organization is trying to create good-paying jobs. Now companies will have to justify the high paycheck for CEOs. Middle managers pay will be more aligned with performance and results.

They will also have to show the pay gap among the companies in a sector. Employee dissatisfaction may increase because of pay gap across similar peer in different companies. Huge pay gaps between top management and lower level employees may decrease employee motivation. Labour associations may use this to ask for a higher pay rise. Operational costs are bound to rise across companies.

However, some critics argue that this pay gap may not mean much due to the difference in the operational structures of organizations in America

3.How are organizations managing the disclosure of the pay information? How does this information impact employees and motivation?

Organisations are trying to disclose it in a way that does not enlarge the performance gap. Firms would include full-time part-time and seasonal workers but will try to exclude a certain percentage of workers especially non-US workers (whose salaries may differ because of staying in a different region with different purchasing power). Companies are using additional disclosures that are not required by the SEC (Securities exchange commission) mainly to clarify issues to workers in the organizations

Primarily employees will look at how they are being paid compared to their peers at their level in other companies and other sectors. Pay gap between top management and lower level will not be a major issue as employees tend to accept this difference. However, a huge difference as in the case of Investment firm KKR & Co and Honeywell, is a guarantee for ensuring employee dissatisfaction due to lack of distributive justice

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