GYC Financial Advisory Pte. Ltd.

GYC (Grow Your Capital) Financial Advisory Pte. Ltd. is a leading pro­vider of financial services in Singapore. GYC was started in the late 1980s by Goh Yang Chye, and has now grown into a one-stop financial services center for both companies and individuals.

GYC has a flexible reward system designed specifically for its four types of staff: the support staff, business development staff, part­ners and practices, and portfolio executives. The support staff receive monthly salaries and yearly bonuses, with their bonuses being calcu­lated based on three factors: their personal performance, the com­pany's performance, and the industry's performance. The business development staff are those who are responsible for servicing the cli­ents, as well as securing business for the company. They are paid a ba­sic monthly salary, as well as "on-target earnings" that are paid based on a percentage of the revenue from new clients that they bring into the company beyond a certain agreed-upon target. Business develop­ment staff also receive discretionary bonuses, which are paid based on a percentage of any recurring fees GYC receives from the clients that they bring to the company.

GYC's partners are experienced individuals, who bring with them a pool of clients. These individuals are in great demand in the financial services industry and often do not wish to be full-time employees of any firm. Upon joining GYC as partners, they receive a percentage of the revenue they help secure for GYC. Practices are similar to partners, except that they have grouped themselves into teams. Some practices are formed internally by partners who joined GYC as individuals. Other practices join GYC as preexisting teams. Like partners, practices are paid a percentage of the money they make for GYC.

Portfolio executives are independent advisors or consultants to GYC. They provide professional advice to GYC on various issues. They are paid regular monthly fees called retainers, and are managed by pre­defined deliverables. This arrangement works well for GYC as it is able to get good advice and insights from these portfolio executives without having to pay them on a full-time basis. It also ensures that they main­tain objectivity in the advice they give to the company.

GYC's reward system also includes nonmonetary benefits like flex- hours and shorter working days in order to attract and retain selected talented staff. This is because some of the staff value flexibility more than financial rewards. There is a need to fine-tune the reward system at GYC. For example, the income of some of the business develop­ment staff at GYC can be very significant in good years. Past experi­ence indicates that business development staff are prone to leaving the company after receiving the large windfall. Further, they may actually not want all the money to be paid out in that year because they will be taxed very highly. Another challenge that GYC faces is that there is a tendency for business development staff to take undue risks when their rewards are directly linked to the revenue they bring to the company.

Questions

12-22. How do GYC's remuneration packages relate to the various motivation theories?

12-23. What are strengths and weaknesses of GYC's remuneration packages?

12-24. Portfolio executives are paid based on retainer fees. Is

this effective? What else can be done to reward portfolio executives?

12-25. What advice would you give to Goh Yang Chye to overcome the remuneration challenges GYC faces?

Source: This case is based on an interview with the managing director, Goh Yang Chye.

Salary Inequities at AstraZeneca

More than 50 years after passage of the Equal Pay Act, women in America still earn about 80 cents for every dollar earned by a man. That adds up to a loss for the average female worker of about $380,000 over a lifetime.

Recently, the U.S. Department of Labor's Office of Federal Con­tract Compliance Programs (OFCCP) entered into an agreement with AstraZeneca, a large international pharmaceuticals firm, for the com­pany to pay some of its female sales associates a total of $250,000.¹¹⁹ AstraZeneca had a contract valued at over $2 billion with the U.S. De­partment of Veterans Affairs to provide drugs to hospitals around the country. That made it subject to Executive Order 11246, which aims to ensure that employees of U.S. contractors and subcontractors with federal contracts pay their employees fairly without regard to sex, race, color, religion, and national origin.

After conducting a compliance review, the OFCCP concluded that AstraZeneca violated Executive Order 11246 by failing to ensure certain women employees were paid fairly. According to the OFCCP lawsuit, an AstraZeneca Business Center had routinely paid some of its female "primary care" and "specialty care" level III pharmaceutical sales spe­cialists an average of $1,700 less than men with the same positions.

Because of the company's pay secrecy policies, many of the women didn't know they were being paid less. In addition to the financial set­tlement, AstraZeneca and OFCCP will review records of the firm's fe­male employees in 14 states. If they find additional statistical evidence of wage discrimination, the company must remedy it.

Questions

AstraZeneca has brought you in as a compensation consultant. Here are the questions they would like you to answer for them:

11-19. Although the case with OFCCP is closed, we wonder if there are any less discriminatory explanations possible for why our women sales reps on average earned less than men. If so, what are they?

11-20. Our own company now uses a point method to evaluate

jobs for pay purposes, and each resulting job class also has a rate range associated with it. Sales associates are now paid a salary that is not based on incentive pay. List three specific things we can do to ensure that a similar problem (inequitable pay based on gender) does not arise again, assuming they continue using the point plan.

11-21. What sort of compensation plan would you recommend for us, and why?