REVIEW OF THE LITERATURE

Definition of the topic:All forms of pay or rewards going to employees and arising from their
employment.(Dessler 2009)The best compensation policy is not based upon the organizational
affiliation among the stakeholders and the administration, but also taking into consideration the
difference of opinion whichgive birth to conflicts in other constricting relationships which exist
in the organization. In thearticle the finest compensation plan is revised taking into the
consideration the two mostimportant factors which are (1) equity and risky debt, and (2) equity
and convertible debt. Future,the benefits of making parallel administration compensation with
the stake holders welfare arediscussed, that this action will reduce the cost of debt. (John., John
1993)The study shows that the control and the ownership of the firm play a vital role in
determiningthe compensation plan for the executives of the organization. The study displays that
when a firmis externally controlled by the shareholders than the company is more efficient in
compensatingits CEOs and the top-management rather than the firm which are internally
controlled by theadministration. One major reason for this cause is that the segregation of
compensation plans andthe performance of the firm, on the other hand externally controlled
companies have learned theart of inclusion of the compensation of the top management and the
performance of the firm interms of the profit. (Mejia, Tosi, Hinkin 1987)Pay of the skilled and
experienced employees and the top management has a connection withthe performance of the
company. In a more structured way we can say that a company is a system in which the input is
the skills of the employees which is organized and controlled by thetop management, and the
output is the overall performance of the company. Managerial activitiesand the compensation are
linked to each other. If the relationship between the compensation andmanagerial activities is
weaken than it will affect the relationship of the input and the output of the company as this
(compensation and managerial activities) link is the connecting chain between the input and the
output of the company. (Harris, Helfat 1997)This paper discusses the compensation structure
of skilled workers in a hierarchical firm.Promotion depending upon the compensating the
employee is a systematic process. Theappraisal process takes a long period of time and do not
serve its purpose as the workers use their shrewdness techniques showing that they are among
the skilled workers. On the other hand, themanager can also show unacceptable behavior,
sometimes by not providing the incentives thatthe employee really deserves. Usually the
managers appraise the the educated workers despite of the fact that two workers are working on
the some level and even though the uneducated worker is more skillful the promotion is given to
the educated and less skillful person. The paper discusses the action plan of providing promotion
plan that are efficient and effective at the sametime. (Bernhardt 1995)There are many studies
conducted in the field of compensating the employees of the business but a little is known by the
strategic compensation system and that is aligned with the companysstrategy. Previously all
research conducted on this topic are limited to only the Americancompanies and there are still
many things that are unclear about the topic. It was found out thatthe pay structures are
connected with the divisional strategic orientation, and there are missinggaps in the previous
studies conducted. More over, it was found out that the position that theemployees hold in the
company hierarchy is one of the most important variables affecting thecompensation system. The
position of employee in the company affects the reward structure, andthe consequences of the
performance on the strategically formed goals. (Boyd, Salamin 2001)

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controlled by incentives. 2). A combination of monitoring, where internal factors are
controlled by monitoring and the external are controlled by incentives. (Joseph, Thevaranjan
1998)Extensive research has been conducted in the area of the relationship of
executivescompensation and performance. But the research has always been limited and did not
cover many areas of the study. Research has been done in the area to highlight the importance of
theexecutives compensation and its effects on the performance of the organization.
(Barkema,Mejia 1998)Although there are many legal laws and ethical standards of the equal
employment opportunities but still we see that there is a discrimination in the cooperate sector
especially between male andfemale employees. This fact is clear from the compensation
structure of the employees. Further laws and standards need to be formed in this area so that
equal employment opportunities can beconstructed. (Braskamp, Muffo, Langston
1978)Alternative compensation plans are discussed in the roof of social welfare. There are many
issuesthat cause conflicts with the compensation issues of the top management, looking in the
light of production uncertainty ever level of employee compensation is dominated by a set
of independent contracts; optimal welfare is a product of equity and incentives.
(Meyer,Mookherjee 1987)Using the concept of expectancy and discrepancy theories, the
relationship of compensation,motivation and job satisfaction is checked. a). Individualized
compensation of employees, incertain conditions can cause work motivation increase. b).
Flexible pay of non excepted workersneither motivates nor increases job satisfaction. c). benefits
are not a good motivator. (Igalens,Roussel 1999)

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BIBLIOGRAPHIC REFERENCES1.
Dessler, G. 2009. Human Resource Management. 11
th
edition. New Dehli: Prentice Hall2.
John, A. T., John, K., 1993. Top-Management Compensation and Capital Structure. TheJournal
of Finance, 48 (3): pp. 949-9743.
Mejia, L. R., Tosi, H., Hinkin, T., 1987. Managerial Control, Performance, and
ExecutiveCompensation. The Academy of Management Journal, 30(1): pp. 51-704.
Harris, D., Helfat, C., 1997. Specificity of CEO Human Capital and Compensation.Strategic
Management Journal, Vol. 18 (11): pp. 895-9205.
Bernhardt, D., 1995. Strategic Promotion and Compensation. Journal of The Review
of Economic Studies, 62 (2): pp. 315-3396.

Boyd, B. K., Salamin, A., 2001. Strategic Reward Systems- A Contingency Model of
PaySystem. Strategic Management Journal, 22 (8) :pp. 777-7927.
Matsumura, E. M., Shin, J. Y., 2005. Corporate Governance Reform and CEOCompensation Intended and Unintended Consequences. Journal of Business Ethics,62(2):pp. 101-1138.
Perel, M., 2003. An Ethical Perspective on CEO Compensation .Journal of BusinessEthics, 48
(4): pp. 381-3919.
Bloom, M., 2004. The Ethics of Compensation Systems. Journal of Business Ethics,52(2): pp.
149-15210.
Rodgers, W., Gago, S., 2003. A Model Capturing Ethics and Executive Compensation.Journal of
Business Ethics, 48(2):pp. 189-20211.
Ungson, G. R., Steers, R. M., 1984. Motivation and Politics in Executive Compensation.Journal
of The Academy of Management Review, 9(2):pp. 313-32312.
Joseph, K., Thevaranjan A., 1998. Monitoring and Incentives in Sales Organizations: AnAgencyTheoretic Perspective. Journal of Marketing Science, 17(2):pp. 107-12313.
Barkema, H. G., Mejia, L. R. G., 1998. Managerial Compensation and Firm Performance:A
General Research Framework. The Academy of Management Journal, 41(2):pp. 135-14514.
Braskamp, L. A., Muffo, J. A., Langston, I. W., 1978. Determining Salary Equity:Policies,
Procedures, and Problems. The Journal of Higher Education, 49(3):pp. 231-246

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Meyer, M. A., Mookherjee, D. 1987. Incentives, Compensation, and Social Welfare.Journal of

The Review of Economic Studies, 54(2): pp. 209-22616.
Igalens, J., Roussel, P., 1999. A Study of the Relationships between CompensationPackage,
Work Motivation and Job Satisfaction. Journal of Organizational Behavior,20(7):pp. 1003-1025
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