SECTION A: CASE STUDY (17 MARKS) There are THREE (3) questions in this section. Answer ALL questions in the Answer Booklet CEO Pay in the news A recent campaign by organized labor unions has brought the issue of executive compensation into the public eye. Media coverage of executive compensation concerns has been extensive over the last few weeks with articles in national publications and a featured story on a television special, in addition to stories on local news stations. This extensive coverage has highlighted public concerns of the high level of pay that top executives receive. The union promotes an executive compensation awareness campaign every year as a strategy to build awareness of perceived inequities between the pay of CEOs and frontline employees. Such awareness often prompts employees to consider forming a union, resulting in the growth of national unions. The publicity has caused some turmoil at Oakwood Lawns. For the first time, the company's CEO pay is featured as an example of perceived excess in the executive suite. Several field managers have been in touch with Don Henry, the director of human resources, to report that employees are outrages at the rate of pay of the company CEO and other top executives. In addition to their desire to remain union-free, Don also knows that such outrage could lead to low morale and other problems at Oakwood. The union targeted Oakwood because it is a big company that has faced some financial challenges. The landscaping company has more than 15 000 employees in offices throughout the Midwest and most of their employees are frontline laborers. The media coverage has been extensive in the area and many company employees who viewed the story were surprised to learn the CEO is among the highest paid in the United States. The news was especially difficult to hear as the company recently announced that employees would not receive an annual pay increase due to the financial challenges the company is facing. Oakwood CEO's annual salary is $975 000. Add in a bonus, stock awards, retirement benefits, and other benefits and his total compensation is close to $10 million a year. The average landscaping technician is paid $28 000 annually. The disparity is clear, and Don must now plan a response to address the employees' concerns. Source: Martocchio J.J (2012) Strategic Compensation: A Human Resource Management Approached. Pearson, 1. Based on the above article, explain the compensation issues raised. (1 Mark) 2. How can Don explain the pay disparity to the employees to ease employees' concerns about fairness of the CEO's pay? Discuss using THREE (3) points, to support your (12 Marks) 3. Explain TWO (2) consequences if Don fails to explain the disparity issues to the employees at Oakwood. (4 Marks) (TOTAL: 17 MARKS)