Answered: What is the relationship between CEO…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

What is the relationship between CEO remuneration and equity theory? Who do you believe should be the referent others in these equity judgements, and can you provide examples?

Expert Solution

Step 1: Define CEO remuneration and Equity Theory:

CEO Remuneration:

CEO remuneration, often referred to as CEO compensation or CEO pay, envelops the monetary rewards and advantages given to a CEO (Chief) of an organization for their administration in driving and dealing with the association. This ordinarily incorporates a blend of components like base compensation, rewards, investment opportunities, value awards, retirement benefits, and different advantages. CEO remuneration is a subject of critical examination and conversation, as it mirrors the monetary prizes and impetuses intended to draw in, hold, and persuade top leaders in an enterprise.

Equity Theory:

Equity theory is a psychological concept by J. Stacy Adams during the 1960s. A social mental hypothesis investigates how people see reasonableness and value in friendly and business-related trades. As per the equity theory, individuals evaluate the reasonableness of their results (like prizes, advantages, or acknowledgment) by contrasting them with the data sources (like exertion, time, or commitments) they give in a given circumstance. At the point when people see an awkwardness between their bits of feedback and results compared with those of others, they might encounter sensations of disparity, which can impact their way of behaving, perspectives, and inspiration. Value hypothesis has been broadly applied in different fields, including authoritative brain research and the board, to comprehend issues connected with reasonableness, inspiration, and worker fulfillment.