JUST COMPENSATION
Introduction
In the modern world today the issue of compensation or pay is one of the contested issues in many companies or work related institutions. Whenever a job seeker is out to prospect for greener pastures they are very keen on the kind of compensation offered. In fact, the search for greener pastures is influenced by the desire for better wages andor salaries. While at work places, the workers are very keen at how their managers remunerate them and if at all their pay is just and worthwhile. In addition, the employees will compare their remuneration with other members of staff in the institution and also from other surrounding companies. Mainly, they would want to compare their take home pay with other similar professionals in other fields. This study therefore seeks to reflect on the trends taking place in the global world especially on the issue of just compensation and the adverse intricacies involved in it. Practical evaluation of different case studies will also be considered. The views of Karl Marx will also be incorporated especially the doctrine of labor theory of value or surplus value.
Accounting Function
The accounting function of every company serves as the heart of that company. Looking at the functions of the heart in the human body, if it fails to function fully then the individual may collapse, deteriorate in function or even die. The accounting function serves the same purpose. By analogy, it can be argued and justifiably so that if the accounting functions of the company fail to function fully and with transparency and accountability, the entire operations of the company may slow down, collapse or even be declared bankrupt. In other words, this status is what can be referred to as the insolvency. Normally, an insolvent company is the one that has its liabilities exceed its assets. Such a status cannot even enable the company discharge its creditors or prepare good remuneration to the employees. The processing of the payments is done under the payroll department. In the same department, the design of other allowances such as bonuses, medical allowances, or retirement packages just to mention a few also constitute majorly on the issue of just compensation.
The point here is that for a company to be able to process quality payments to its employees there are so many factors to be considered. This is to enable one view the issue of just compensation from its dual point of views. In other words, a company can fail to execute just compensation to its employees not because the management is corrupt but because the company is experiencing economic hard times. Indeed, there are economic factors that can influence the performance of the business, for instance, global inflation, demand and supply trends, government policies, availability of resources, low markets and so on and so forth.
To reiterate, it is important to consider the accounting function of any business before analyzing the theme on just compensation. This is because any type of injustice or flaws or frauds, all occur in the payroll department. Again by looking at the dual aspect of a business as mentioned above, it will widen the scope and hence provide a more comprehensive and integrative approach to just compensation.
Business Trends
Inflation occurs when the prices of the product are either low or high. In this context the income of the employees is not able to meet the challenges of the day. A deeper reflection on this will indicate that the businesses around are not able to remunerate their workers to levels that they can enable them cope with the adversities of inflation. So, to this extent, it may seem that the workers are not getting just wages. The options are only two raise their pay or retain the pay as agreed in the contract. The company may not be able to raise the pay if it is not doing well. Remember that, every business prepares its payroll from the profits realized through the sales revenue. Note again that salary preparations depend entirely on the profits realized and this realization should be in a timely manner. Consider the following case study Company X deals with manufacturing of milk related products in the State of Kansas. Its monthly turnover rate is 1000, 000. This turnover rate enables the company to set aside 500,000 for the remuneration of the staff. Or better still an amount of 500,000 goes to the payroll department to process payments. Due to inflation, the sales go down due to low consumption of milk related products in Kansas State. The company reports a decreased rate in its actual turnover rate of 1000, 000 to 500,000. This is a 50 decrease hence by mathematical implication the payroll may reduce the salaries with 50 too. In this regard, instead of setting aside 500,000 it might set aside 250,000. Further to this, the salary of each payment will go down by half. This is serious. The one who gets 20,000 will therefore get 10,000.
The case illustrated above can also be used to explain the trends when the demand and supply are unstable. The rule is that if the demand of the milk related products of company X above is high then the supply will also be high, hence more revenue will be generated. Again, if the demand for the milk related products are low then the supply will be low, hence less revenue will be generated. The financial implications to company X will be similar to those illustrated above. This will be the same case in the context of low markets. Low markets are literally characterized by unstable trends in demand and supply and inflation. Once again, the effects will be similar to those illustrated above.
Government policies influence not only the consumer choice but also the performance of many businesses. This can occur due to the tax policies, tariffs and custom duty among others. Companies will try as much as possible to evade operations that are highly taxed. Again the business may fail to meet its salary budgets since its expenses in settling the tax fee are more. Again tough policies may lessen the performance of the business hence reducing its penetration in the markets. This can even make the business close down.
Subjectivity in Just Compensation
The employee can determine the weight of hisher remuneration. This means that one can influence the quality of hisher earnings as pertains to hisher negotiation skills, competency and assertiveness. This occurs during interviews when one is been considered for a post in a company. Normally one would be asked to state the salary scale of preference. In this event one can quote very highly or one can quote very low. There are employers who will go by what the interviewee quotes. For instance, she can quote 60,000 for the post of a doctor and yet the employer has the potential to pay himher 100,000. Again, an interviewee can quote 100,000 and yet the employer can only afford to pay 60,000.
This may influence what the employer will pay the new employee for the rest of hisher service with the company. Now, in case there emerges an issue about just compensation in that the employee may learn that other institutions get 120,000 for the post of a doctor while she is getting 60,000 the employer may defend his course on the terms of contract. This means therefore that the employee agreed to or consented to that kind of remuneration. So, the issue of just compensation may take this dimension in that employees invite it in their career lives due to lack of information by the time they get into a new job, and especially if it is for the first time.
In this regard, the intensity of compensation that ought to influence employees in their selection of a job and particularly the decision to accept the job, may be adversely contaminated by the ignorance of the new employee in gauging whether what she is getting is just or unjust compensation. It is impossible for them to determine if they are over remunerated or under remunerated. However, with time and after a moderate long service in their companies they will interact with other colleagues in different institutions. In so doing, they will assert if they are getting fair and just compensation.
Objectivity in Just Compensation
This will be discussed at length since it is the major theme in this study. Here, it shall explore the theme of just compensation in many dimensions. It is important to note that compensation is not only a way to improve performance of the employee but it is a moral promotion of the dignity of the employee as a person. It is both a production incentive and a moral issue (Boatright 225). In this light, compensation shifts from being an economic factor to being a moral factor. Therefore, whenever one complains about being unjustly remunerated she is actually addressing a moral issue. She is advancing a moral complaint.
It was indicated above that certain trends in business can influence the accounting function of the business. In other words, it can make compensation go high or low. Consider the example of company X in Kansas State above. It was indicated that low remuneration may subject the employees to meager incomes and as a result become unable to meet their basic needs. In this event, a society sinks into unjust situations. It can be argued and justifiably so that the employers are not elevating their staffs from this bad and unjust situation by not paying them just wages.
It had been mentioned earlier that the government directives do influence the policies of companies. It can set the pace of compensation that will cut across the board. The wage that is set for all workers is referred to as the market-clearing price (Boatright 226). This makes it possible and an obligation for all employers to remunerate their workers at a standardized price which is also perceived to be the most efficient scale. The benefits of this government policy becomes benefits not only the employee but also the employer in that they will detect possibilities of overcompensation to certain employees.
Marketing-clearing price has almost same features with minimum wages set by the government. Legally, an employer may be subjected to pay hisher workers certain levels of payments in regard to the different professions. These minimum wages are geared towards enabling average citizens to realize their everyday basic needs. It was indicated earlier that the employee may determine the amount which they will get from their employers. They can end up quoting low compensation scales where the employer may approve knowingly that they are low compensation. In other words, the employer takes advantage of the ignorance of the new employee. It is illegal to consciously endorse payments that are unjust. In this regard, the moment it becomes an illegal thing it also loses moral value and justification.
It is important to note that compensation structures are an inherent factor in the relationships companies establish with their staff. For a longer period of time now, surveys indicate that pay systems are a major way in bringing market like labour exchanges within the organizations. In this view, only economic reflections count in understanding how remuneration systems impact the organizations and its workers. Advanced surveys in the organizations mainly on issues of equity and fairness indicate that a sound understanding of the effect of the remuneration systems needs an examination in the respective effects in the psychological order, social order, and moral order (Matt 1).
It has been indicated earlier that the government can direct employers to pay certain wages at minimum. However, even in those instances where employers are obligated to advance just compensations, there are still noticeable misunderstandings as to what constitutes equity and fairness in given moments. The modalities of distributive justice emphasize that the basic needs of the individual be addressed first. This is the rationale behind the policy of minimum wage. It also aims at creating an equal environment that is devoid of discrimination. For example, employees of company Q may feel more privileged compared to employees of company R. With the execution of minimum wage, the employees of company R will feel that they are earning a recommended wage across the board.
Fairness in compensation is deeply rooted within the principles of distributive justice. Here, what is important is the promotion of human dignity that the employees possess. It can be argued that employment does not replace the dignity of the employees at all. Once an employer decides to hire the service of an individual, she consciously or unconsciously hires the whole of the person. Therefore, one cannot purport that she is interested with the services only and forget that they are proceeding from a whole human person. For instance, when a company hires a technician and only seeks to care for the technician only in the light of being their technician then they are not promoting hisher human dignity. However, they seek to remunerate himher relies wholly on the technician as a human person and with dignity. In the event they treat him as a technician and that is all, then they are taking hisher being as a means to an end and fail to regard himher as an end in himselfherself.
There is another class of employees in the ordinary level, who are not identified with any institution, equity and fairness in such instances with respect to compensation is grounded on the tenets of commutative justice.
CEO Compensation
It is believed that compensation depends on who one is in a given institution or the position one has in an organization. This kind of privileges can attract unjust compensations. Here, unjust compensation implies arbitrary overpayments to the top officials even when they do not deserve it. Normally, the employees cant dispute this as it may lead to immediate sucking or cold war. Again a CEO is in a position to control every function of the company such that she directs how much to be paid to hisher salary account. On the other hand, junior staff can elevate their CEOs such that they even raise their salary scales. This can occur in the accounting department where the junior staffs literally assign more compensation to the CEO. This popularly occurs in Americas CEOs who out of gluttony endorse their paychecks. On the other hand, CEOs are highly compensated on the perception that they are proficient in their services to the organization (Macdonald 1).
The salary advanced to an American CEO includes a base salary, bonuses, incentive projections, lavished fringe benefits and stock grants not forgetting also stock options. All this comprise hisher compensation package. This increased wages can lower opportunities for new employment as companies seek to cut more labour costs. It is discouraging to note the gap between the junior employees and the CEO in regard to compensation where the CEO takes home almost 500 times the compensation of the average worker. It is noted that the period between 1993 and 2000, the standard remuneration of the CEO increased by 470, while the pay of the average worker only rose with a mere 42. This is only 6 points ahead of the rate of inflation (Boatright 230).
The CEO has a managerial and moral responsibility to report any deficiencies in the accounting function. She should provide accounting information to the Auditors regarding the financial operations of the company. He should ensure that no frauds occur in the business. It had been mentioned earlier that fraud or flaws in the accounting function can adversely affect the compensation procedures of the company. Therefore, the CEO has a very big responsibility in ensuring that all workers get just payments accordingly. To do the opposite is a neglect of duty on their part and in fact, a contradiction of their profession. In this regard, a CEO proves hisher professionalism by how best she oversees the accounting functions. Again, it can be inferred that a company whose CEO is failing in hisher duty to ensure a good and sound accounting policies, is not well and sufficiently qualified such a CEO is acting unprofessionally.
Conclusion
Indeed, just compensation is a very important aspect in any business enterprise if it is to perform successfully. A company that does not justly remunerate its employees is risks being insolvent. The workers play a very productive role in any business enterprise. Their salary package acts as the core motivation of their service and I concur with the fact that no worker is willing to give service for free. We all need to meet our everyday needs no matter the job. I concur that in a just society its people live above poverty line. No just society can be full of cases where its people are not able to fulfill, at least, their basic needs.
Just compensation is not only an economic issue but also a moral issue. It should always be regarded as such. I believe that there are external factors that can influence the process of remuneration in a company. Trends in demand and supply, inflation, government policies and market mechanisms play a significant role in this respect.
It is true that the CEOs have a managerial and moral responsibility in ensuring that distributive justice thrives in across the company. To reiterate, it is the responsibility if the CEOs to ensure that the accounting department rewards justly every employee. There it will be inconsistent to have CEOs who are just interested on accumulating more wealth at the detriment of other workers. It is impressive when the government sets minimum wages as this will promote fairness and above all ensure that all workers get only that pay which will enable them fulfill their needs.
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