This paper explores how Compensation Management affects the job satisfaction and employee retention in banking sector

of Pakistan. Questionnaire and in-depth approach the changing trend of employees from financial rewards to non financial rewards as well. work overload, lack of practical approach towards training and seniority oriented incentive plans are some of the major issues which need immediate attention by the administration An ideal compensation policy encourages the employees to work harder and with more determination. It also helps the organizations to set the standards that are job related, realistic and measurable. employees in case study bank (Habib Bank Limited) are contented by the compensatory measures by the bank management. Majority of the respondents have a firm belief that there is a positive and direct relation among rewards and motivation level of an employee. More than 73% of the employees agreed that HBL offers fringe benefits including gratuity, pension payment, and medical benefits. There was a high proportion of employees agreeing on the statement that my organization provides me insurance benefits. employees have declared their fringe benefits and insurance policy as major components of their compensation plan and have acknowledged one of the major cause of job satisfaction in case study bank. Rewards also included giving opportunities to the employees in order to grow and learn through training and development programs provided by the organization. programs by bank are effectual for their career progression and work improvement. However, some of the respondents have shown their apprehension that practical results of training programs are not achieved. They stressed that post training implications are not practicable. Training program get worthless when environment of workplace (include colleague interaction, managers behavior, facilities, infrastructure, and extreme workload) do not permit to implement the learned concepts and continue with traditional ways of banking system. Almost half of the respondents have shown their reservation on salary package they are getting against their extreme workload. When asked about their satisfaction with the current salary, more than 56% of the employees think that there salary is not sufficient. incentive plan which is not comprehensive and performance oriented. Employees expressed that incentives are given on seniority basis which are not always performance oriented Sometime unpredictable events such as inflation in a country also have a considerable affect on the compensation policies. With the consistent rise in prices of the commodities, management

decides to increase the salaries as well so that employees can meet their needs. In addition to that, banking is all about making good relations with the customers and attracting them for banking service. If any banker has good relations with his customers and if customer is bringing large deposit amount for the bank then management often rewards the employee for bringing deposit to the bank and creating good relations with the customers which ultimately result in increasing motivation for organizational and self development of employees.

2 and 20 rule, whereby compensation is tied to the size of assets being managed (the 2%) and to managers performance as measured by the financial markets (the 20%, or carried interest)

overcompensation of the C-suite is not merely an issue of fairness or whining by the 99 percent. The phenomenon is having disastrous business consequences, including a serious mis-allocation of capital and talent, repeated governance crises, rising income inequality and an overall decline of the US economy. Thats because in implementing market-based compensation, there is a failure to distinguish results due to sheer luck (beta) from the results due to skill (alpha). Thus when someone is running an oil company while the price of oil is skyrocketing, it doesnt need a lot of skill to generate high profits: such executives shouldnt receive outsized compensation from a rising tide that lifts all boats. Moreover those who should be monitoring compensationpension funds, mutual funds and foundationshave not only been asleep at the wheel: they have been actively complicit in the debacle. They have readily outsourced performance evaluation and compensation in order to avoid their obligation to make tough decisions and bring pay into line with performance. (Outsourced here is a euphemism for abandoned.) The combination of a foundational myth and absent monitors over the past two decades gave rise to harmful incentives, asymmetrical payoffs and windfall compensation levels The result has been the creation of perhaps the largest and most pernicious bubble of all: a giant financial incentive bubble. This in turn results in the twin crises of American capitalism: repeated governance failures, which lead many to question the stewardship abilities of American managers and investors and rising income inequality. the skewed incentives and huge unearned windfalls have given rise to righteous but unwarranted belief in entitlement: the individuals now consider themselves entitled to such rewards.
The elements of the debacle Among its many points the article makes are:

The system rests on a false narrative of entrepreneurship and sweat equity: No one questions the financial rewards to entrepreneurs like the founders of Google who by talent and persistence create value in the marketplace and reap the rewards. Most entrepreneurs either fail or achieve merely middling success. But the suggestion that top bureaucrats of large business organizations are systematically creating sweat equity like the founders of Google is ridiculous. The rising tide lifts all boats. Managers should only be compensated for success beyond what would normally be expected. Obvious mechanisms to separate skill from luck are ignored: Modern financial theory has developed elegant mechanisms to distinguish skill from luck. The Greek letter beta represents the amount of risk a company presents to an investor because of how it moves with the market. The Greek letter alpha represents any return that is generated greater than what is expected in the light of beta of a stock. The decomposition of financial returns into beta (luck) and alpha (skill) is what any sensible system demands, but which is exceedingly rare in the United States. As a result, huge windfalls have accrued in times of rising asset prices, often accentuated by misbehavior in terms of strike prices and vesting dates to accentuate the gains. Reaching for extra earnings by cutting small corners when such large amounts were at stake was inevitable. Managerial compensation is inversely related to shareholder returns: The past 15 years have witnessed mediocre stock market returns for long-term investors, remarkable levels of managerial compensation and repeated governance crises tied to ill-conceived managerial incentives created by these instruments. The system might be tolerated if it served its supposed goal of aligning managers interests with those of shareholders. The result has been the exact opposite as managers game the stock price to enhance their own compensation at the expense of shareholders, as Roger Martin has documented in his book, Fixing the Game. Pension funds and others are hiding their own insolvency: Pursuit by pension and other funds of alternative assets such as hedge funds and private equity along with repackaging assets as new assets are for the most part feints to conceal the underlying poor performance or even insolvency of the funds. The system results in a misallocation of capital and talent: The compensation system generates asymmetric incentives to pursue risk in the financial sector and is directly responsible for the recent financial crisis. The system creates enormous financial incentives for the Steve Jobs of the future to launch a hedge fund that profits from volatility rather than to do something constructive with his or her life. The system generates rising income inequality: The surge in income inequality can be traced to windfalls for managers and investors and the rise of alternative assets. As a result of these generous contracts, the top 0.1% of the income spectrum is dominated by executives and financial professionals. Repeated governance failures raise questions about the stewardship abilities of US business: The system generates an unsustainable financial incentives bubble, that puts the credibility of capitalism in question. Suggested agenda Desai suggests a two-part agenda of reform: Boards and big investors such as pension and mutual funds must stop outsourcing compensation, do their job of separating luck from skill and base compensation on longer-term accounting metrics.

Big investors like pension funds and foundations should stop allowing the repackaging of new assets or expecting alternative assets to resolve latent fund insolvency Constraints to change Desai is however not optimistic when he looks at the constraints to change: Regulation and taxes may make things worse: Tempting as it may be to try to fix the problem by regulation, Desai worries that regulations may have unintended consequences and simply make things worse, citing the example of the limits on deductibility of executive pay as a regulation that backfired. One area where policy may be helpful is the carried-interest rule which benefits private equity and hedge funds by mis-characterizing labor income as capital income. Appeals to ethics are likely to be ineffective: The moral problems of the current system are obvious. Yet appeals to ethics will be powerless in the face of these high-powered financial incentives. Markets will not correct the excesses: The article documents the profound conflicts of interest that prevent capitalism from self-correcting. Compensation committees comprise cobeneficiaries of the system who have no incentive to rock the boat. Pension funds can avoid responsibility by leaving it to the market to monitor the investment managers they hire. Self interested managers from alternative investments happily adopt the incentive schemes that provide their brethren with windfall gains. Whats missing from the picture? For an article that gives us so much, it might seem ungrateful to ask for more. Nevertheless: The article overlooks hidden C-suite retirement benefits: By focusing only on market-based compensation for executives, the article overlooks the analogous unsustainable bubble of C-Suite retirement benefits, as documented by Ellen Schultz in her incisive book, Retirement Heist. The amount of money involved in executive incentives is extraordinary. For instance, at General Electric [GE] the unfunded liability for executive pensions increased from $1.1 billion in 2000 to a staggering $4.4 billion in 2010. By contrast in the same period, GEs share price decreased by some 60 percent. Schultzs book shows that these practices are as endemic in large firms today as flawed market-based compensation. The article doesnt name names or quantify the phenomenon. The article says that the unsustainable bubble is huge. How big is huge? It would have been helpful to cite other sources, such as the excellent 2005 book, Pay without Performance, which documents and quantifies the scale of the problem. An egregious exponent is highlighted as a model of the future: It is extraordinary that in the very issue of magazine which exposes CEO over-compensation, an egregious exemplar of the phenomenon (Jeff Immelt, CEO of General Electric [GE]) is highlightedat the front of the magazineas a model of the future. During the eleven year period of Immelts tenure, GEs stock price has declined by around 60 percent while C-suite compensation has exploded. The placement of the article: Desais article appears at the back of the magazine, on page 124, almost as an after-thought. It takes a careful reader to realize that the substance of the article undermines most of the other proposals in the issue that are aimed at reinventing America. Thus Thomas Kochan in a generally excellent article on page 64 about The Jobs Compact For Americas Future, is puzzled as to why big US firms have systematically avoided the high road in terms of providing a workplace that draws on the creative talents of the workforce and instead have systematically adopted practices that demoralize workers. Kochan could have found the

answer to his puzzlement sixty pages later in Desais article on page 124 showing how incentives encouraged C-suite incumbents to feather their own nests, rather than create value for shareholders or generate innovative workplaces. Over-compensation is unsustainable As Desai makes clear, despite the constraints to change, the overcompensation of the C-suite and the financial sector is not sustainable. It causes serious mis-allocation of capital and talent, repeated governance crises, rising income inequality and an overall decline of the US economy. It obviously cannot continue, if only because, as Margaret Thatcher used to say in a different context, Sooner or later you run out of other peoples money.