Part I:According to the Living Wage Calculator developed by Amy Glasmeier, Professor of Economic Geography and Regional Planning at MIT, the living wage rate for a family of four (two working adults, two children) is $16.54 per hour. What are the implications of raising the minimum wage rate to a livable wage? Do you think the government should increase the federal minimum wage? Explain your answer.Part II: Read Case Study 1. CEO Pandemic Pay
Taking One for the Team or Window Dressing? on page 396 and discuss your answers to the questions.
Book Title: eTextbook: Managing Human Resources
Chapter 10. Pay-for-Performance: Incentive Rewards
Case Study 1. CEO Pandemic Pay
Taking One for the Team or Window Dressing?
Case Study 1. CEO Pandemic Pay
Taking One for
the Team or Window Dressing?
During the 20202021 global COVID-19 pandemic, many executives pay was stifled, reduced,
or even withheld. In an effort to build unity and keep people in jobs, some executives decided
to make personal sacrifices. For example, Ronald Rittenmeyer, CEO of Tenet Healthcare
Corporation, gave up three months payroughly $390,000to a fund that was set up to help
struggling employees.
While this may seem quite generous, even after the pay cut Rittenmeyers salary, including
bonuses, was close to $2 million. This amount does not include his stock awards, which were
worth more than $11 million. Little wonder, then, that one of the largest U.S. unions said
Rittenmeyers donation amounted to little more than a gesture.
A study examining companies during the COVID-19 pandemic found that 762 companies
issued some type of action to reduce executive compensation during the crisis. However, as
the study points out, The average amount of base salary reduction for the CEOs only makes
up about 7.8% of their total granted compensation. This may not be much of a sacrifice when
you consider that the typical pay package for CEOs at the largest U.S. companies tops $12
million per year. To put this number in perspective, companies in the S&P 500 stock index pay
executives, on average, 264 times as much as median employees. Is it too much?
That depends on who you ask. To most people, it seems unreasonable that a boss would make
264 times the pay of the average worker. However, if you ask workers who have seen their
CEOs steer their companies back from the edge of bankruptcy and weather the storm of a
pandemic, they might not complain too much.
Questions
1. Are CEOs and key corporate executives worth the large pay packages they receive?
Explain.
2. Do you agree with Peter Drucker that corporate executives should receive
compensation packages no larger than a certain percentage of the pay of hourly
workers? Explain.
3. Has the Dodd-Frank Wall Street Reform and Consumer Protection Act giving
shareholders the right to vote on executive pay influenced the size of these packages?
Explain.
Sources: Adam Shapiro, New Study Calls CEOs Pandemic Pay Cuts Window Dressing, Yahoo!
Finance (February 10, 2021); Anders Melin and Bloomberg, Some CEOs Are Keeping Those Massive
BonusesEven after Cutting Thousands of Jobs, Fortune (May 18, 2020); Peter Eavis, As the
Pandemic Forced Layoffs, CEOs Gave up Little, The New York Times (July 29, 2020).
