A management policy of Noguchi & Black is that all employees keep all compensation matters confidential. No one knows how much another employee makes or the amount of the raise or bonus.
Noguchi & Black establishes bonuses based on billable hours. Each paralegal is required to bill 1,500 hours a year for wages. If a paralegal bills more than 1,500 hours a year, that paralegal is rewarded with a bonus according to the number of excess hours billed.
Larry Esteban heard through the grapevine that Elizabeth Rinehart received a very large bonus because of the hundreds of hours of overtime she worked. Larry felt that was strange since it was common knowledge that Elizabeth refused to work overtime. She was never in the office on the weekends Larry was in. Elizabeth was always too busy to help another paralegal. She appeared to be the last person that should be given a large bonus.
a. What could be the problem here?
b. What elements could have contributed to Elizabeth’s bonus?
c. What are the consequences of this problem?
d. How could the problem be avoided?