Reference no: EM133041989
Case Study 1: United States Auto Industry Back on Top ... of CEO Pay
During the financial crisis, many executives' pay was stifled, reduced, or even withheld. Among the hardest hit was the U.S. auto industry. Shareholder groups, union leaders, political officials, and the general public all demanded change in the way auto industry executives were getting rich while their cars were getting poor. For example, Ford made some major cuts for its executives and its employees.
This is why people were shocked to find out that for 2011 the CEO of Ford, Alan Mulally, was to receive $56.5 million in stock awards. Even today, it is one of the richest pay packages ever given to a top executive in the auto industry-and it is even after all the clamor over sky-high executive paychecks. Is it too much?
That depends on who you ask. For most, it seems unreasonable that a boss would make more than 1,000 times the pay of the average worker. However, if you ask Ford workers who have seen Mulally steer Ford back from the edge of bankruptcy, they probably would not complain too much. If you asked Ford's shareholders, it would be hard for them to overlook the fact that Ford shares have gone from $1.56 when Mulally first took over to $14 a share. If you ask Ford dealers, they may be too busy selling one of the strongest lineups of cars around to answer.
Of course, no one really knows if Ford would have been sitting in such a good position regardless of Mulally. On one hand, there are plenty of factors, such as a national economic recovery, that led to Ford's improvements that Mulally clearly could not have had a finger on. On the other hand, there are plenty of companies that would be willing to pay $50 million if they knew their company would rebound as Ford has under Mulally.
Questions
- Are CEOs and key corporate executives worth the large pay packages they receive? Explain.
- 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.
- Will the Dodd-Frank Wall Street Reform and Consumer Protection Act giving shareholders the right to vote on executive pay influence the size of these packages in the future? Explain.
Case Study 2:
Adobe's Family-Friendly Benefits: An Unexpected Backlash
Adobe Consulting Services (ACS), a provider of HR software application systems, prides itself on the variety of benefits it offers employees. In addition to health care, pension, and vacation benefits, the company also offers an attractive family-friendly benefits package including flexible schedules, child and elder care assistance, counseling services, adoption assistance, and extended parental leave. Unfortunately, in recent months, the company's progressive work-life policy has experienced a backlash from several employees, as the following case illustrates.
In March 20011, Teresa Wheatly was hired by Adobe as a software accounts manager. With excellent administrative and technical skills, plus four years of experience at Adaptable Software, Adobe's main competitor, Teresa became a valued addition to the company's marketing team. As a single mother with two grade-school children, Teresa received permission to take Fridays off. She was also allowed to leave work early or come in late to meet the demands of her children. Teresa is one of 11 software account managers at Adobe.
The problem for Adobe, and particularly for Janis Blancero, director of marketing, began in the fall of 2011. On September 15, Dorothy McShee, citing "personal reasons"-which she refused to discuss-requested a four-day workweek for which she was willing to take a 20 percent cut in pay. When Dorothy asked for the reduced work schedule, she sarcastically quipped, "I hope I don't have to have kids to get this time off." On October 3, Juan Batista, a world-class marathon runner, requested a flexible work hours arrangement to accommodate his morning and afternoon training schedule. Juan was registered to run the London, England, marathon in May 2013. Just prior to Juan's request, Susan Woolf asked for and was granted an extended maternity leave to begin after the birth of her first child in December.
If these unexpected requests are not enough, Blancero has heard comments from senior account managers about how some employees seem to get "special privileges," while the managers work long hours that often require them to meet around-the-clock customer demands. Janis has adequate reason to believe that there is hidden tension over the company's flexible work hours program. Currently, Adobe has no formal policy on flexible schedules. Furthermore, with the company's growth in business combined with the increasing workload of software account managers and the constant service demands of some customers, Blancero realizes that she simply cannot grant all the time-off requests of her employees.
Questions
- Do managers like Janis Blancero face a more complicated decision when evaluating the personal requests of employees versus evaluating employees' individual work performance? Explain.
- Should Adobe establish a policy for granting flexible work schedules? Explain. If you answered yes, what might that policy contain?
- If you were Janis Blancero, how would you resolve this dilemma? Explain.