EXERCISE: Ethical and Practical Compensation Dilemmas.

PROCEDURES: While answering these questions, your group may want to address the questions below. They are designed to help you determine if an issue involves ethical considerations.

1. Does the action involve intentional deception?

2. Does the action purposely benefit one party at the expense of another?

3. Is the action fair and just too all concerned? The Golden Rule not only dictates that we "do unto others as we would have them do unto us" but also commands that we treat others as we might wish to be treated.

4. Would the manager feel comfortable if the action were made public or must it remain a secret?

5. Are managers justifying the action by telling themselves that they can get away with it or that they will not need to live with the decision's consequences?

6. Would the decision maker recommend the action to other managers or firms?

7. Will the action build goodwill and better relationships?

In answering the questions, you also may also want to consider three different schools of thought regarding ethical decision making. The Utilitarian Approach argues that decision outcomes should result in the greatest good for the greatest number of people. The Moral Rights Approach holds that decisions should be consistent with fundamental rights and privileges as set forth in the Bill of Rights or some other document such as the United Nations' Declaration of Human Rights. The Justice Approach stresses that decisions should be equitable and follow the distributive justice and fairness principle. Some argue that the ideal decision occurs when it is supported by the ethical standards of all three ethical approaches. After all groups have finished their analysis (ten minutes or less) of each Compensation Dilemma, the instructor will call on one or more groups to answer the questions presented. This will be followed by a class discussion of each Dilemma.

COMPENSATION DILEMMAS

1. Based on an evaluation of the knowledge, skills, and abilities needed to do each job, a company has determined that two jobs (Job A and Job B) are equal. However, when the firm studies the labor market, it finds that applicants for Job A are plentiful whereas those for Job B are very scarce. Should the firm offer less pay to those who apply for Job A, or should the pay be equal?

2. Assume that the supply of electrical technicians is low so a firm hires agroup of them at $18 per hour. Two years later, due to a recession, the supply of technicians is high so the market rate for them is now $15 per hour. Should the firm pay new hires $18 or $15? Should it lower the pay of existing technicians to $15?

3. Jim is given an extremely large raise because of his superb work record one year. As a result, he is currently earning $50,000 whereas others at the firm holding the same job are earning $45,000. Everyone expects Jim to continue to excel and enhance the entire unit's productivity. Unfortunately, Jim's performance drops off after the first year and is now just average. What should be done about his pay? Should it be reduced to reflect his current performance?

4. One year, Ethan's performance is truly spectacular (just as good as Jim's had been in the previous case). However, the company has no raise money available that year so no one, including Ethan, receives a merit raise. Is this appropriate?

5. Mary and Sue both work in the same department. Mary believes that Sue is being paid considerably more than she is. In fact, both employees are being paid about the same amount. Mary wants a pay raise and complains to her boss and the compensation manager. Mat should the compensation manager say, assuming the firm follows the policy of not revealing the pay of individual employees? Should Mary be told the amount of Sue's pay? Or, should Mary only be told that there is a "misunderstanding" and that her belief is incorrect? Or, should some other approach be taken?

6. When Mary was hired, she was told verbally that she would receive a raise when she finished her college degree and yet another raise when she was given additional responsibility. She accepted the job offer based on this understanding. However, during the next two years, the firm experienced slow sales and had to ask all factory employees to accept a 12 percent pay decrease. But Mary, who does not work in the factory, has finished college and has accepted more responsibility. Should she receive a raise?

7. Two firms in the chemical solvent industry decide to merge. Employees in the testing department of Firm A have enjoyed high pay for many years. However, Firm A is purchased by Firm B, which has a history of paying low wages. As a result, employees in Firm A's testing department earn on average $2.00 more per hour than those at Firm B. Upon completion of the merger, what wage levels should prevail? Should wages be cut for those who worked for Firm A? Or, should wages be increased for those in Firm B?

8. Sue is a 55-year-old employee of Company A. Her children are out of college and her parents have both died. Company A offers a child care program to all employees along with an elder care program. However, Sue, like many other employees, has no need for these services, neither now or in the future. Should the company retain these programs? Should alternative benefits for employees who have no use for such services be offered?

Choose one compensation dilemma and answer those questions.