The Issue of Compensation: How does the pay gap between CEOs and Employees affect?

It has been three years later, and still there has been no information of the CEO to employee ratio upon pay of public companies. Here, the question still remains, “Do companies have to determine their median employee compensation by an actual count or would statistical sampling suffice? How should global companies reconcile differences in wages and benefits from one country to the next?”

Three years ago, Congress has made it a requirement that public companies had to reveal the ratio of pay between CEOs and their employees. The reasoning behind this was due to the fact that there was a belief that this issue was a big influence upon the financial crisis of 2008. Since there have been no results, Congress has left it up to the Securities and Exchanges Commission to come up with a rule to figure out this calculation of these companies.

However, some people are not fully supportive of this decision. Tim Bartl, who is the president of the Center of Executive Compensation, the advocacy arm of a Washington nonprofit called the HR Policy Association, does not believe that this would influence an investors’ business decision making.

However this requirement also discloses the CEO’s entire compensation: from salary to bonuses to the value of stock based awards. There are many organizations that calculate ratios such as AFI-CIO’s average worker to CEO ratio is 357, Bloomberg’s ratio of Standard to Poor’s 500 companies is 204, and the average of the top 100 companies is 495. Basically what this means is that CEOs of the companies (on the table) average 495 times of the non-supervised workers in their industries. These ratios are still in the works and are not exactly as accurate as they can be due to differential denominators, but still, the numbers are here to see.

Peter Drucker, who is a management theorist, states that the ratio is in fact a huge deal. In an article he had written in 1977, he considered a 25:1 or even a 20:1 ratio is the appropriate limit. Anything beyond that is not very good for business due to the fact that it tends to undermine the employees and it promotes a “winner-takes-all” type of mentality which can hurt the company in the long-term.

There are many mixed feelings about disclosing comparisons of pay between executive members and employees. What is the problem that is dealt with here? Do you think CEOs deserve to make so much pay? Of course they are taking on a position that requires a lot of strategic planning, but say if an executive member were to be paid a lower annual salary, would that make an affect of their work ethic? We value these people as our managers, and if they are not compensated enough, what do you think would happen?

Article & Photo Source:

Intel: losing its core or struggling for innovation?

Andy Bryant, who is the chairman of Intel, has been scrambling frantically to find a new and innovative way to put the “chip” back into technology. In recent years, technology has evolved tremendously and nowadays, our society is more dependent on smaller forms of technology such as, our smart phones and our tablets. Unfortunately, this has taken a huge toll upon laptops and computers due to the fact that with smaller technology, there may no longer be a use for the computer chip.

Not only does declining PC sales affect this, but also the industry is constantly changing to the point where Intel has not been able to keep up. Recently the new and innovative Cloud technology has been creating a huge demand for basic servers, proving that there really is no need for the computer chip anymore.

While this is on the executives’s minds, they’ve also been in turmoil from the fact that their Chief Executive Officer, Paul Otellini had made an unexpected announcement in November that he would be resigning. He has been serving on the board since 2005. His reason being “It’s time to move on and transfer Intel’s helm to a new generation of leadership.” Intel has been looking for a new successor since. They’re expecting it to be an internal hire, although they are open to externals. So far, Otellini has about a month before he leaves and no one has been able to fill his position yet. Intel has been considering Brian Krzanich and David Perlmutter, who are supposedly their best candidates. They work very closely with the core business of Intel, both overseeing chip design and how it is made.

In the meantime, Mr. Bryant has been preparing his employees for a huge change within the company. He understands that now it is a new era, and that both the company and its employees must make the adaption to this change in order to hopefully continue making positive revenues in the future. He has admitted that “the customers have changed, and we have to as well…where the revenue is now is not where it is in the future.”

To try and keep up their revenues with their crisis in hand, Intel has recently been working with companies outside of the U.S. to create smartphones and tablets that they claim as their own. They are also creating a television set and a subscription service.

Noted in Chapter 1 of our management book, there are 10 crucial areas that operations managers must make their decisions on and the very first one listed is “design of goods and services.” Unfortunately Intel chairmen have run into this problem and need to find a way to either create a new product, or make their existing product better to be able to compete with other rival companies that are doing the same. With this decision, it also leads into the other decisions that must be made, such as “process and capacity design,” “supply chain management,” and especially “intermediate and short-term scheduling.” Although these are only a few other decisions that need to be focused on, they all contribute to what it takes to be a good manager.