Morality and Ethics in the Corporate World: a Balanced Approach to Transparency
Harvard’s Controversial Compensation Practices
In the case of “Lavish Pay at Harvard,” Performance focused compensation helps the companies to award the employees who have contributed outstandingly and who make a difference in the organization, such as revenue generation. It is very important to pay well to hire and retain the top employees who have become crucial for the development of the firms. Since Harvard had to face a lot of opposition from the student community and it is an institution where there is scope for a lot of other development projects, they were under pressure to cap the pay. Distinct differences in the salary of the top brass can interfere with corporate governance; other employees who are in junior management would feel really demotivated. Part of the salary paid to the top brass could be used in other activities like welfare, small hike, or bonus to all the employees so that they feel motivated and create a feeling of oneness like working towards a common goal. Variable pay should be there to reward people who have performed outstandingly, but it should not violate corporate governance where the new joint is underpaid than the industry average.
Balancing Ethical Considerations with Compensation Strategy
There should be a fine balance and compulsory variable pay linked with Performance to motivate others and also to achieve rewards through better Performance. The decision to cap the pay is right, given the circumstances of the events and protests surrounding them. Since, in this case of a university, there are certain values to adhere to, the development and welfare of students should also be taken into account. The corporate world also witnessed a row over higher pay and rewards to a few top brass, and resignation followed. In the corporate world, variable pay and higher pay are compulsory to attract and retain talent. Finally, it is the employees who are the biggest assets, so it is always important to maintain a balance of ethics.
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Case Analysis: P&G’s Agreement with Bankers Trust
After having read the case, in my opinion, it is the fault of P&G to have entered into such an agreement with Bankers Trust despite knowing that full information has not been disclosed. Customers always have a choice of entering or not entering into a contract with the information available to them. If P&G felt that the information shared was not complete, it should have thought twice before entering into a contract with Bankers Trust since P&G was not obligated to enter into the contract. Moreover, the audio tapes recovered were those of employees discussing among themselves. In none of the audio tapes did any employee tell P&G representatives that Bankers Trust had any obligation to protect P&G’s interest which P&G claimed. Hence, P&G should not have agreed to enter into the contract if they had so many doubts. Bankers Trust, on its part, is not at fault since no company discloses the calculation, and also, there is no obligation too on its part to protect any other company’s interest.
- Frydman, Carola, and Dirk Jenter. “CEO Compensation.” Annual Review of Financial Economics, vol. 2, no. 1, 2010, pp. 75–102.
- Monks, Robert AG, and Nell Minow. Corporate governance. Wiley, 2011.
- Rosenbloom, David S. “Public administration: Understanding management, politics, and law in the public sector.” Random House USA Inc (1993).