Case Study - CEO TAKES PAY CUT TO HELP EMPLOYEES

Viti Solutions is a small payment processing company based in Suva, Fiji. It has only two shareholders Dan and Lucas Price who are also brothers. Dan is the CEO, and while Lucas provided some of the initial funding for the venture, he is not directly involved in the decisionmaking of the company. At a recent policy meeting, Dan Price pledged that all Viti Solutions staff would make at least $70 000 annually over the next three years of the companys existence. To fulfill his promise, Price cut his salary as CEO from $1 million to $70 000 and re-allocated some of the companys $ 2 million in annual profits. This meant that approximately 30 of the companys workers would have their pay doubled, and another 40 employees would receive a significant pay increase. Fifty workers who already earned more than $70 000 were also reported to be excited about the initiative. According to Price, his brother, Lucas, was supportive but reacted with caution and questions. A few of the staff who benefited from Prices magnanimous decision were Phillip Underwood, whose pay jumped 16%, and Shaun Ortiz, whose pay increased from $36 000 to $50 000. Shaun started at Viti Solutions just a few months earlier and was, until the pay rise, the lowest paid in the company. Shauns family had struggled with homelessness after emigrating from Bangladesh when she was younger, but with the pay rise, Shaun is now the primary breadwinner in his family. Another beneficiary of Prices ideology was Jason Kumar, 38, who was struggling with his original wage but could now repay overhanging student debts to the government. Customers of Viti Solutions also recognized the constructive influence of the pay increases and supported any reward to employees who had performed their tasks successfully and functioned as a team. Price credits his approach to a study he read on happiness, which found that additional income could make a significant difference to a persons emotional wellbeing, up until their total annual earnings reached $75 000. According to Price, reducing his income to raise the salaries of his employees was a moral imperative, especially when he had heard his employees discussing the difficulties they had had been facing during the current health crisis. Price is adamant that he is not the only CEO trying to close the income gap or make the changes needed to financially value his workforce and is surprised at his new notoriety with the public. Price has reportedly received valuable feedback and affirmation from up to 100 other CEOs who support his vision. Prices pay rise initiative will continue until the original profits of Viti Solutions are restored, forecasted by Price to be in the next two to three years.

Questions: For Viti Solutions to fulfill its commitment, several staff may receive higher pay rises compared to the others. Based on this scenario, critically discuss this impact on the organizations current approach to performance management and recognition for employees who may not benefit from such pay rises? Evaluate your discussion with real or hypothetical examples.