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Equity Theory Discussion

On equity theory, present a discussion of how organizations in which the executives earn large bonuses/incentives (and where these are widely known) can use equity theory to justify these bonuses to the rank and file employees. Can they be justified?

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Equity theory is based upon inputs and outputs, and the level of equality among employees when we consider these inputs and outputs. The executive pay and compensation system in the U.S. has been widely battled in recent years. The main argument is that executives are paid too much money or receive bonuses that are too large. Many contend that employees could be paid higher amounts if the executives did not receive large bonuses or increased salary amounts. There are a few issues with this argument. When things go wrong in a company - really wrong - the weight of those problems is on the executives, and not on the employees. It takes advanced training, operational management skills, and other skills as appropriate for the situation in order to handle all of these issues that arise. ...

Solution Summary

This solution discusses equity theory and executive compensation.