Solved by verified expert:This is part 2 of the previous compensation plan assignment (see part 1 attached). Please note the document titled Week 4_Compensation Practice is the first part of the assignment
compensation_plan_outline.docx
week_4_compensation_practic1.docx
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Assignment 2: Compensation Plan Outline
*****I have attached a copy of the previous
assignment*******
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Using the same company you researched in Assignment 1,
evaluate the company’s compensation plan to determine how it
could be improved.
Write a six to eight (6-8) page paper in which you:
1. Evaluate the existing compensation plan to determine if it is the
most appropriate for your company. Explain your rationale.
2. Determine the most beneficial ratio of internally consistent and
market consistent compensation systems for the company you
selected.
3. Evaluate the current pay structure used by your company and
assess the recognition of employee contributions.
4. Make two (2) recommendations for improving the effectiveness
of the discretionary benefits provided by the company you
selected.
5. Evaluate the types of employer-sponsored retirement plans and
health insurance programs provided by the company you
selected and compare them to that company’s major competitors.
6. Use at least three (3) quality references. Note: Wikipedia and
other websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
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Be typed, double spaced, using Times New Roman font (size
12), with one-inch margins on all sides; references must follow
APA or school-specific format. Check with your professor for
any additional instructions.
Include a cover page containing the title of the assignment, the
student’s name, the professor’s name, the course title, and the
date. The cover page and the reference page are not included in
the required page length.
The specific course learning outcomes associated with this assignment are:
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Evaluate the effectiveness of traditional bases for pay (seniority
and merit) against incentive-based and person-focused
compensation approaches.
Compare and contrast internally consistent and marketcompetitive compensation systems.
Evaluate the role of benefits in strategic compensation.
Use technology and information resources to research issues in
compensation management.
Write clearly and concisely about compensation management
using proper writing mechanics.
COMPENSATION PRACTICE
1. NVIDIA Corporation is one of the world’s biggest sellers of electronic gaming products
and has a compensation strategy that is based on four main objectives. The first is to draw and
globally retain the best talent, the second is rewarding performance, the third is laying focus on
growth, and the fourth is thinking regarding total pay. The company has very competitive
compensation packages and they are fairly structured to give employees confidence needed to
invest in the future of the company. NVIDIA offers their employees comprehensive, more than
average benefits. The company offers all of its employees a chance to become shareholders in
the corporation through their generous employee stock purchase plan (ESPP).
In its most recent years, nearly 85% of qualified staff have taken part in the company’s
ESPP program, which has brought a standard return of 71% on the employee’s investment fund.
The company is focused on committing to its employees long-term success by providing benefits
such as flexibility in working hours. Workers are offered as much time off as needed based on
their individual needs, there are other programs that help workers deal with time management
and stress as well as an array of convenient onsite services. The company also supports its
workers in their vital life events through its global Employee Assistance Program as well as a
generous leave program. The company also offers employees job training in a formal setting
which uses both internal and external training content. The company’s “NVLearn” program is
available and offers employees dozens of development classes.
The company also offers their employees the Harvard Management Mentor in addition to
electronic libraries at the Institute of Electrical and Electronics Engineers. They may also obtain
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COMPENSATION PRACTICE
access to the Association for Computing Machinery program through the company’s corporate
membership. They offer tuition reimbursement employees at most accredited universities and
pays for tuition to technical education programs offered at the Stanford Center for Professional
Development. NVIDIA conducts a global survey for employees every 18 months and also
collects frequent feedback on targeted issues. However, the company has faced some
compensation challenges such as a tight budget, market pay, pay range and structure, as well as
bonus and incentive pay (Nvidia, 2011).
2. In an effort to establish how NVIDIA Corporation applies compensation practices in
determining the negative or positive impact on the company and its stakeholders, the company
undertakes a program to determine issues by priority. Each year the company conducts an
analysis to help in increasing the managerial acceptance of issues that imply most to all
stakeholders and the corporation as well. To determine the report content, the company uses the
GRI G4 PRINCIPLES, and the first is stakeholder inclusiveness, whereby the company takes
viewpoints from multiple stakeholders and place them into consideration. The second is
sustainability context, and here the company considers economic, social as well as environmental
sustainability impacts that are connected to the issues in the analysis.
Thirdly, materiality is another consideration, and the company focuses its analysis on the
identified issues as the highest priority for the company and its stakeholders. The last principle is
that of completeness, whereby the company does not purposefully avoid contentious issues or
difficulty. The company’s analysis on stakeholder feedback examines feedback from internal
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COMPENSATION PRACTICE
stakeholder sources. This provides understanding to the issues that are more relevant and
important to the stakeholders. They use sources such as community surveys, customer requests,
competitor’s reports, employee survey feedback, investors’ queries, ratings, and rankings
questionnaires in addition to the Trade organizations’ code of conduct. The company also
evaluates company sources such as risk factors that are identified in the annual and quarterly
reports via the Securities and Exchange Commission and also in enterprise risk discussions with
NVIDIA executives.
3. Many laws exist in the United States that often affect NVIDIA’S compensation practices.
The main laws being discrimination laws, safety laws and employment laws. NVIDIA as an
international company finds it more complex as a global brand, since it not only has to abide by
US laws and regulations, but also must adhere to laws that are demanded by all other countries
which it operates, as it relates to compensation practices. As a global company, there are
demands that come with providing compensation among all employees within the different
countries. There must be a balance when it comes to the employee’s needs and expectations. Any
compensation strategy that the company adopts, must conform to local customs and laws against
international corporate policies. Therefore, this poses a challenge for NVIDIA.
There are labor unions in many of the countries which NVIDIA operates. This directly
impacts employees’ wages and salaries. Market factors also heavily impact employee’s
compensation strategies for NVIDIA as other companies offer stiff competition, therefore,
forcing the company to increase funds set aside for compensation (Martocchio, 1998). The aim
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COMPENSATION PRACTICE
of compensation in many companies is mainly to motivate, attract and retain talented staff within
the
company. It is important to note that the traditional pay model has often been perceived quite fair
as it offers consistency when it comes to workers compensation. In an attempt to examine the
various law, market factors, and labor unions impact on NVIDIA Corporation, in April 2009 the
company’s Board adopted a reimbursement recuperation Policy which covered its entire staff.
Under this same policy, the company was required to prepare an accounting restatement to
correct a fault on the annual financial statement as per the report on Form 10-Q or as per Form
10-K as a result of material noncompliance with all financial requirements as per the federal
security laws. This was to include a restatement of a committee of independent directors, the
board including the company’s CEO, chief financial officer or the employees having received
variable reimbursement that would not have been owed if the original interim reflected the
restatement.
The company requires the CEO, as well as the Chief Financial Officer, disgorge the tax
after the person’s amount of the variables portion of the compensation payment that would be
payable if the restatement was reflected in the annual financial statement. The company’s board
may at its discretion, consider if the individual was caught up in the preparation of the company’s
financial statement or if they might have caused the need for restatement and therefore, were
permitted by the appropriate law to recoup the amounts by cancellation of all outstanding equity
awards in the person’s procession. This would require the individual to provide full payment of
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COMPENSATION PRACTICE
any variable of gains, per the realization of stock exercise options on the open market, and sale
of the vested shares. They would also adjust the persons future compensation.
4. Many companies tend to share the same traditional basis of pay such as longevity and
seniority pay. First, in this kind of pay, employees are rewarded or rather the increase in base pay
depends on the length of service. Secondly, this type of payment demands employee
compensation in relation to their skills length and is indicated by seniority. Thirdly, companies
retain the assumption that employees with time become valuable and may often choose to leave
if they do not see signs of a pay increase in the future. The fourth assumption of the traditional
mode of compensation is that companies that involved collective bargaining, did it based on
seniority to
consider promotions as well as transfers among the employees. The final seniority assumption is
among government jobs, because they provide automatic pay increases for performance.
Traditionally just like many other companies’ practices, NVIDIA promotes and
compensates its employees based on seniority from the directors, CEO, heads of departments to
the lowest ranking employees in the company. Vacant positions in the company are always
advertised and applications are sent inviting all interested individuals. The company focuses on
an inclusive strategy in employee recruitment giving priority to women as well as
underrepresented minorities, mainly to enhance equity in the hiring process. The company also
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COMPENSATION PRACTICE
lays emphasis on recognition and development through a systematic compensation and
performance analysis. There is also continuity in professional development in NVIDIA as well as
internal and external promotions among diverse employees. When is comes to employee support,
NVIDIA has several benefits for its employees, resource groups, and has an unconscious bias
awareness. They work to identify and evaluate issues and trends affecting employees. Just like in
the traditional basis for pay
increment, NVIDIA sets internal goals for its employees as a base to attain more compensation
as well as encourage the workers to focus on the future of the company. To encourage
emplpoyess, the company monitors the number of promotions as well as turnover among the
minority groups in relation to the total. On the company’s analysis in relation to the traditional
bases for pay, the company analyzes pay as well as promotions annually in the attempt to ensure
fairness among its employees and also review its payment practices based on multiple variables
to ensure completeness. During this process they review employees at the same compensation
level as well as rate their performance level and time in position. Since 2015, the company has
been working with a third party firm in order to review its pay practices across ninety different
metrics, and up to today the firm has never found any disparities in relation to female and male
compensation.
In the attempt to measure retention and engagement among its employees, the company’s
turnover, continues to decrease with the total rate falling to 6.7%, in comparison to 15.2%, the
average for the semiconductor sector. The company’s voluntary rate has declined from 7.2
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COMPENSATION PRACTICE
percent to 5.8 percent versus the 9.1 average for semiconductor companies. These companies
have a low voluntary turnover in all sectors of the industries. NVIDIA performs exceptionally
well in terms of how its employees regard the company’s culture of innovation. There is also a
great deal of pride, trust, and respect between the managers and the employees (Myloni, Harzing
& Mirza, 2004).
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