These figures dwarfed what other big businesses paid for discriminatory practices. These businesses included Texaco, Inc.; Shoney's, Inc., Winn-Dixie, Stores, Inc.; and CSX Transportation, Inc. Critics saw Coca-Cola's settlement as signaling a major breakthrough among big businesses as coming to terms with diversity in the workplace (King). Because the company has been a leader in many areas, these critics regarded it as setting an example of greater openness to promotions across races of employees (King).
Settlement terms included $23.7 million as back pay; $58.7 million as compensatory damages; and $10 million as promotional achievement award fund distributed to the complainants. A remaining $20 million went to attorney's fees and $36 million to the implementation of internal program reforms. Coca-Cola would also create an external, seven-member task force to insure that the terms were complied with and to oversee the company's diversity efforts (King).
According to Social Networks. - Connections in a business organization can be a factor in inequitable salary negotiations. A study analyzed negotiations data on 3,670 job applicants at a mid-sized high-technology firm in the U.S. For a 10-year period starting in 1985 (Seidel 2000). Findings revealed that referral networks could put racial minorities at a disadvantage, particularly in salary negotiations. Friends and other connections in the organization enhanced an applicant's chances for salary increases. Racial minority groups also tended to have fewer friends in the organization. And there was negative direct effect of an applicant's belonging to a racial minority group in negotiating for salary increases (Seidel).
Inside Information and the Right Connection
The friend or connection in the organization could obtain or provide inside information to the applicant in helping the latter to favorable salary negotiations (Seidel 2000). When an applicant finds a job vacancy, a friend or inside contact would be a strong tie in the hiring process. That inside information, especially concerning compensation, would be an advantage to the applicant and a disadvantage to the organization. The inside contact could be caught between two loyalties, which eventually would be in favor of the applicant. While racial minorities would have their own networks in the same degree as Whites would, these networks would have less access to companies dominated by Whites. Network differences would contribute to wage differentials, which favored demographic groups in the organization's numerical majority. Although most U.S. companies have a majority of White employees, the trend has been changing in recent years. More racial minorities and foreigners have been joining the workforce. The trend could mitigate current network disadvantages to minorities, but the so-called "glass ceiling" effects could still limit the advantages minorities would have wanted to obtain through their network (Seidel). Those with the right connections would tend to have the advantage to salary negotiations as well as other negotiations in the organization.
According to Age - the payment of benefits to aging employees could be another ground for a lawsuit, according to an attorney of the EEOC (Wiscombe 2003). According to Atty. David Offen-Brown, the Commission recently managed a recent $250 million age-discrimination settlement for employees of the California Public Employees Retirement System or CalPERS. It is the nation's largest public retirement fund. The employees complained that the company attempted to reduce their benefits on account of their age. Offen-Brown said that the settlement called for heightened awareness on the unlawfulness of age discrimination. It emphasized that any attempt to reduce the benefits to employees age 40 and above would be scrutinized. A company, which would decrease these benefits, would be taking risks, according to him. The lawsuit was filed under the Age Discrimination in Employment Act (Wiscombe).
The employees charged that police officers suffered discrimination when the company reduced their industrial-ability retirement benefits in proportion to their age at the time of hiring. Hundreds of police officers and firefighters with disability pensions were affected. These complainants began their career at 31 or older (Wiscombe).
Beverley Hilton's Age Discrimination Lawsuit
EEOC filed the lawsuit on behalf of 11 male and female employees, aged over 40, who complained that the Hotel denied they jobs as servers for reasons of age (Bronstad 2001). The Hotel, for its part, said the reason was the employees' lack of adequate experience. The Hotel expressed outrage over the lawsuit and, instead, claimed that the Hotel was a model employer in 200s. The owner himself was 76 years and the Hotel had a quarter of the employees working there for at least 20 years. The complainants applied for their jobs between 1998 and 2000 (Bronstad).
Age discrimination suits, like this one, increased and became prevalent recently as more baby boomers reached an age ceiling, according to Anna Park, executive director of EEOC in Los Angeles (Bronstad 2001). The Commission said that, between October 1, 1999 and September 2000, 16,009 claims of age discrimination increased from 14,141 in previous years. Of this number, the companies were found not to have reasonable cause for the discrimination. The Commission noted that Mondrian Hotel was also reported to have resorted to discriminatory practices on the basic of national origin. The Hotel's explanation was typical in that the employees did not fit its projected image. Mondrian Hotel later paid $1.08 million in settlement in August 2000 for firing nine bellmen of other nationalities. They were replaced with 15 White workers before the Hotel's reopening in 1996. In the case of Beverley Hilton, the EEOC would like to recover a still-unspecified amount of pay for the complainants, based on what they should have earned if they remained in their jobs. This would be at the standard minimum wage plus typical tips. The minimum wage was $6.25 an hour and typical tips ranged from $250 to $500 a week (Bronstad).
According to Corporate Culture - the rash of equal pay discrimination suits could only mean that the United States has been suffering from salary equity (Moline 2004). In 1974, a typical U.S. company chief executive officer earned 35 times more than an average factory worker. This ratio had widened to a 326-1 by 1998. Business professor Diane Swanson at the Kansas State University made this observation at the Leeds School of Business Symposium on Business and Professional Ethics. She discussed the results of a recent survey of 200 Australian executives. These executives preferred working where the highest salaried manager earned 57 times the company's lowest paid worker. Executives are paid to focus beyond self-interest. They are supposed to supervise. An executive who pins his attention n pay inequities may not be the correct personality for the organization. The findings of the study could explain the reasons behind the seeming lack of interest in reducing U.S. salary inequities despite the rise in corporate greed (Moline).
Swanson said that the ultimate effect of salary inequity in an organization would not only be bad business but also a lack or poor ethics on the part of well-paid managers (Moline 2004). She predicted that managers who would not admit or realize the role of corporate ethics and values in their decision-making would neglect the community, which the company served. The survey, however, noted that only 16.6% of the surveyed executives agreed to the 326:1 ratio at only 39.1%. The typical executive believed the ratio should be 57:1 salary differential. This ratio would accommodate some self-interest factor "for greater potential compensation." A group of surveyed executives saw differential salaries as a motivator. The rest associated the concept of pay equity with socialism (Moline).
What Executives Had to Say Regarding Pay Inequity
Half of those surveyed disagreed that the government should intervene with regulations to reduce pay inequalities in corporations. When asked about the place of ethics and values in their decision-making, more than half expressed preference for highly differentiated pay scales in the workplace (Moline).
According to Performance and Rewards - a study on professional baseball players attempted to measure salary inequity on individual performance on a pay-for-performance context (Harder 1992). The respondents were all major-league baseball players in the 1987-1988 season of the All-National Basketball Association. They received base salaries and pro-rated and discounted signing bonuses from 1976, 1977, 1987 and 1988. Pay inequity among most of the surveyed players was strongest among over-rewarded. Under-rewarded players were less likely to decrease performance for fear of losing their future rewards. Under-rewarded players took more shots but scored less than over-rewarded players. On the other hand, over-rewarded players contributed more by a non-scoring performance. Over-rewarded players were also more team-oriented, while under-rewarded players were more self-oriented. The results could also mean that a team's management would tend to derive the greatest value from its highly paid players. These players, in return, would play more regularly and perform better. Thus, management would react to high pay rather than to over-reward inequity. Individual performance could be a function or result of group expectation. It could also be the outcome of one's own expectation of a high or low performance (Harder).
The Equal Pay Act has been receiving a lot of focus and attention since the rash of discrimination lawsuits.…