EXECUTIVE COMPENSATION PACKAGES AND JOB SATISFACTION A case study of fast consuming goods companies (Cadbury, Nestle and Dangote)

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CHAPTER ONE

INTRODUCTION

1.1       Background to the study

In contemporary organizations, employees are the main resources through which all the other objectives are achieved. There are various classes of employees in organizations today and their job satisfaction promotes effectiveness. Millan (2011) argued that employees in US will demonstrate pleasurable positive attitudes when they are satisfied with their job. Thus, high job satisfaction will increase the productivity of an organization, in turn increasing the organizational overall performance. When not satisfied, employees on their part become nonchalant about their work duties which invariably have negative impact on performance of the organization.

According to Bozeman & Gaughan (2011), the perception of being paid what one is worth predicts job satisfaction in Ghana. They further state that there is a positive significant relationship between executive compensation and job satisfaction. Job satisfaction  is  perceived  as  an  individual’s  attitude  and behavior  towards  aspects  of  his  own  job.  Personal  job satisfaction  is  an  affective  or  emotional  response toward various  facets  and  outcomes  of  one’s  job,  meaning  that personal satisfaction in relation to a job is not unitary, as a person may be satisfied with one aspect of his or her job and dissatisfied with the rest.

According to Adamaechi & Romaine (2012) job satisfaction is very essential in any kind of group or organisation in Nigeria and it can mean the difference between success or failure of any group or joint activity. Hence for enterprise to achieve its goals employee job satisfaction such enterprise must adequately compensate the workers.

According to Popoola (2007), in  the  21st  century  people pay much attention to their life style and the money they earn from the work than their predecessors. However, it remains unclear whether many of them would continue working, if it were not for the money they receive Employee expectations of a compensation plan are that it is fair and equitable, that it provides  them  with  tangible  rewards  commensurate  with their skills and further, provides recognition and livelihood.

Executive compensation, in today’s organizations in France, is a major consideration in Human Resource Management, and how it is allocated  sends  a  message  to the top  employees  about what the organizations believe to be important and worth encouraging (Rodgers & Gago 2013). For employers, the executive compensation  usually  represents a sizeable  proportion  of  operating  costs.  However, some employers view this only as a cost, while failing to consider the strategic benefits of a well-considered executive compensation and benefits plan. Executive compensation therefore, is a critical element of human  resources  management  system in South Africa,  and  should  be designed to work together with other elements of the system (for instance, organizational goals, professional development, principal  leadership,  worker  recruitment  and  selection)  to enhance performance (Dulebohn  & Werling,  2007). Money not only helps people to attain their  basic  needs,  but  it  is  also  instrumental  in  providing higher  level  need  satisfaction  as  observed  by  (Dulebohn  & Werling,  2007). As a  result,  most  employees  value  work according to how much they gain from it.

It is important to note that both managers and subordinates are working towards the goal of ensuring organizational profitability to ensure their pay and compensations. The researcher is suggesting that job satisfaction is worth considering when especially when executive compensation package policy is in place in the organization. In Nigeria, executive compensation packages differs substantially from typical pay packages for either hourly workers or salaried management and professionals in that executive pay is heavily biased toward rewards for actual results (Akindele, 2014). Hence if a company underperforms, the executives typically receive a smaller fraction of their potential pay. Conversely, if a company meets its annual objectives and the stock price responds long term, the executives stand to receive a much larger payout. There is no doubt on the fact that any manager that receive poor pay must surely force the subordinates into serious work without much consideration for their welfare.  Executive compensation package is structured to reward company performance and align executive pay with shareholder value. As a result, unlike most other employees, a majority of executive pay is at-risk; in other words, executives may never receive it. However, if executives and the company perform well, they along with the company’s shareholders stand to gain much more from superior performance. Based on all all these facts, the research found it worthwhile to examine executive compensation packages and its effect on authoritarian management style in selected fast consuming good company in Nigeria.

1.2       Statement of the problem

Several studies have failed to examine the issue of job satisfaction from the frequent adoption of executive compensation packages in organizations. Executive compensation has a great impact on productivity. To achieve effective work performance calls for job satisfaction among the workers.  In Nigeria, there  have  been  a lot of complaints about performance of organizations due to economic crises. The performance and productivity of organizations is the determining factor in executive compensation, hence, job satisfaction of top staffs might be hinged on the performance of the company.

In this scenario, pay promotion, incentives, autonomy and comfort are the hallmark of job satisfaction. Although, this might be driven by the organizational policy of executive compensation packages, a situation whereby the annual incentives and bonuses, long term incentive plans, retirement plans and supplemental executive retirement plans which are particularly determine the financial performance of the organization. Therefore, managers are left with their abilities to satisfy their employees in order to ensure high productivity that will eventually secure their future. Most multinational companies, especially those producing fast consuming good utilizes executive compensation package with motives of ensuring workers job satisfaction. However, the researcher has seen the need to examine executive compensation packages and job satisfaction in fast consuming goods companies since no academic has been conducted on it all over the world.

1.3       Objectives of the study

The general objectives of this study is to examine executive compensation packages and job satisfaction in fast consuming goods companies while the following are the specific objectives:

1. To examine the structure of executive compensation packages adopted by fast consuming goods companies in Nigeria.
2. To analyze the effects of executive compensation packages adoption by fast consuming goods companies in Nigeria.
3. To evaluate the effect of executive compensation packages on job satisfaction in fast consuming goods companies in Nigeria

1.4       Research questions

1. What is the structure of executive compensation packages adopted by fast consuming goods companies in Nigeria?
2. What are effects of executive compensation packages adoption by fast consuming goods companies in Nigeria?
3. What are the effects of executive compensation packages on job satisfaction in fast consuming goods companies in Nigeria?

1.5       Hypothesis

H_O: executive compensation package do not have significant effect on job satisfaction in fast consuming goods companies in Nigeria.

1.6       Significance of the study

The following are the significance of this study:

1. The findings from this study will form a policy guideline for government, policy makers, business administrators, shareholders and the general public on executive compensation packages and its effect on job satisfaction. It will also educate on the structure of compensation system in place in many organizations with consideration for the determinants of job satisfaction.
2. This research will be a contribution to the body of literature in the area of executive compensation package and its effect on job satisfaction in an organization, thereby constituting the empirical literature for future research in the subject area.

1.7       Scope of the study

This study will cover the structure of executive compensation packages in place in fast consuming goods companies in Nigeria and its effect on the job satisfaction.

1.8       Operational definition of terms

Compensation packages: A compensation package is the combination of salary and fringe benefits an employer provides to an employee. When evaluating competing job offers, a job-seeker should consider the total package and not just salary

Job satisfaction: a feeling of fulfillment or enjoyment that a person derives from their job.

Motivation: a reason or reasons for acting or behaving in a particular way.

Retirement: the action or fact of leaving one’s job and ceasing to work.

Executive: a person with senior managerial responsibility in a business.

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