Case Study: Human Resource Strategies and Ford CEO Compensation

This assignment presents a case study on the compensation of Ford's CEO, Alan Mulally, and its implications within the context of human resource strategies. The analysis delves into the justification of Mulally's $56.5 million pay package, considering his role in steering Ford through the financial crisis and increasing shareholder value. The study references Peter Drucker's perspective on executive compensation, the importance of corporate executives, and the impact of the Dodd-Frank Act, which grants shareholders the right to vote on executive pay. It explores the relationship between executive compensation, organizational goals, and shareholder expectations, highlighting how compensation structures influence employee motivation and business performance. The assignment references several academic sources to support its arguments.

Running head: HUMAN RESOURCE STRATEGIES
Human Resource strategies
Name of the Student
Name of the University
Author’s Note

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HUMAN RESOURCE STRATEGIES
Table of Contents
Question 1:.................................................................................................................................2
Question 2:.................................................................................................................................3
Question 3:.................................................................................................................................4
References..................................................................................................................................5

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HUMAN RESOURCE STRATEGIES
Question 1:
Generally, the CEO is considered as the highest ranked executive within the company
and for that, he has a maximum amount of responsibilities including the major part of the
decision making as well as managing of the total operations part, resources or shares of the
company etc. He behaves as the linkage of the communication with the board of directors and
also corporate operations (Samina & Zaman, 2015). Basically, the board of directors decide
the person as a CEO for a company.
The CEO must has the largest pay package in order to have more responsibilities. The
board of directors have set such practices or standards for the CEO for achieving the goal of
the organization. The CEO is eligible for these practices while he would be able to meet the
standard of the company (Mousa & Chowdhury, 2014). The compensation of CEO of the
company must be large because he can meet or exceed the organizational goals or objectives.
The board directors of Ford Company has decided Alan Mulally as a CEO because he
is successful for achieving the organizational objectives. Moreover, he is successful not only
for achieving the organizational objectives but also he can able to perform for exceeding the
organizational objectives and for that he was rewarded by receiving $56.5 million. This
award is considered as the highest award among the auto industry of United States. The
compensation of this CEO is reasonable because he has steered the Ford Company from the
condition of the bankruptcy. On the other sides, he has taken over a part of increment of
shares of this company from $1.56 million to $14 million. The increment of the shares helps
to take care of the business activities and also involves to increase the confidence among
other investors for conducting a better business operations of this company. All of these
actions are performed by the CEO of this company. Thus, for these following activities, the
large compensation of CEO of this company is justified.

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HUMAN RESOURCE STRATEGIES
Question 2:
According to the Peter Drucker, the corporate executives should receive the larger
compensation. Because they are considered as the highest rank based employees and for
having the importance of their job positions, they have lots of responsibility for achieving the
organizational objectives (Gomez-Mejia, Berrone & Franco-Santos, 2014). The workers are
obviously a significant part of this organization but they top executives are more important
than the general workers. Moreover, the compensation of any executive depends on their
abilities or responsibilities for the organization. The corporate executives have more
responsibilities than the general workers.
Depending on this case study, the CEO of this Ford Company has achieved the
success regarding the organizational goals by turning the condition of this company from the
effect of bankruptcy (Balsam & Harris, 2014). In the financial crisis period, the most of the
executives have faced problems regarding their salaries in terms of reduction or withhold.
The CEO of this company has taken over the company from the condition of bankruptcy to
the normal condition and for that the operations of the corporate executives including the
CEO of this company takes more importance as well as more attraction of the workers.
Moreover, there exists another reason regarding this success and this is to increment
of the share points. However, depending on the share points, it helps to vary the workers’
salary and also other compensations like insurance etc. Not only this reason helps to sustain
the employee satisfaction but also it also increase the business as well as marketing part
(Kaplan, Samuels & Cohen, 2015). However, with the help of this share points, the company
has to build up more features in their products which attracts customers and leads to achieve
organizational objectives.

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HUMAN RESOURCE STRATEGIES
Thus, the corporate executives should have a larger compensation than the general
executives for having lots of responsibilities which are connected with the achievement of the
organizational goal.
Question 3:
According to Dodd-Frank Wall Street Reform and also Consumer Protection Act, it
says that the shareholders have the right for voting an executive pay that will impact the
packages in future (Rhee, 2016). As per any hierarchical structure of any organization, the
shareholders are considered like the base of any organization and they provide the financial
support of any organization for continuing their business activities.
For a particular job position of any organization, the shareholders or owners of any
organization select the particular compensation packages in accordance with their
responsibilities. Moreover, the workers are considered as the backbone of the organization.
For each workers of the organization, they have a suitable compensation package including
insurance, policies and others parameters for motivating workers towards achieving their
goals (Han, 2017). But during the business activities, if they feel that the executives are not
properly working as per their expectations for achieving the organizational outcomes, on that
case, they have a certain right to reduce their compensation package.
A good package always motivates each employee to achieve their targets. Moreover,
if the performance of workers exceed their expectations, therefore the shareholders of that
organization decide to increase their compensation package. It is not only justified for only
the employees of that organization but also this justification effects on the performance of the
top executives. However, the shareholders are basically the owners of any organization and
for providing the financial support to the organization, they have always an expectation on
each employees to meet their targets as per the business condition of such particular duration

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HUMAN RESOURCE STRATEGIES
(Zhang, Lo & Yang, 2014). For this, they have provided the satisfied salary structure to the
employees for seeking their motivation. They have the right to select the exact salary
structure for the employees. In addition to this, their opinions are most important for the
organization. In this way, they have a capability to select the pay as per the size of packages.

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HUMAN RESOURCE STRATEGIES
References
Balsam, S., & Harris, E. E. (2014). The impact of CEO compensation on nonprofit
donations. The Accounting Review, 89(2), 425-450.
Gomez-Mejia, L. R., Berrone, P., & Franco-Santos, M. (2014). Compensation and
organizational performance: Theory, research, and practice. Routledge.
Han, S. J. (2017). Corporate Social Responsibility And Stockowner-Employee Partnership:
An Empirical Analysis. 地地地地地地地地地地地地地地地地地地地地, 6, 43-61.
Kaplan, S. E., Samuels, J. A., & Cohen, J. (2015). An examination of the effect of CEO
social ties and CEO reputation on nonprofessional investors’ say-on-pay
judgments. Journal of Business Ethics, 126(1), 103-117.
Mousa, F. T., & Chowdhury, J. (2014). Organizational slack effects on innovation: the
moderating roles of CEO tenure and compensation. Journal of Business Economics
and Management, 15(2), 369-383.
Rhee, R. J. (2016). Intrafirm monitoring of executive compensation. Vand. L. Rev., 69, 695.
Samina, Q. S., & Zaman, L. (2015). Cash Compensation Of CEO Or All Employees? Which
Affect The Profitability Of Private Commercial Banks' Of Bangladesh. Review of
Integrative Business and Economics Research, 4(3), 89.
Zhang, J. L., Lo, K., & Yang, S. (2014). 'Say-on-Pay'Votes and Compensation Practices.