Analysis of Gail Kelly - Case Study Example

11th April Illawarra Mercury Kelly’s pay puts rivals in shadow, 13 November, p. 15 Gail Kelly Gail Kelly is the former chief executive officer of Westpac. Being a South African born Australia business woman, Kelly became the first female boss of the Australian company in Addition to being the highest paid executive with hey salary getting to around $13 million. Kerry, who assumed the position of CEO in 2008, was listed as the 56th most powerful woman in the world due to her influence in the operations of Westpac. Having started her career as a banker in Nedcor Bank, Kerry was first tracked into an extensive training program that enhanced her management skills in addition to leadership abilities. With her Masters in Business Administration that she obtained in 1987, she was promoted to the position head of human resources at the bank. Another notable issue that made Kerry to acquire strong leadership skills was that after heading the human resource department at Nedcor bank, she further held various positions such as general manager, and personal and cards banking. Once she migrated to Australia, Kerry became the head of Customer Service Division at the Commonwealth Bank an aspect that exposed her to more challenges but she had the ability to address them and her performance improved. This made her to be recruited as the Chief Executive Officer at St George Bank. After resigning from Commonwealth Bank in 2007, Kerry joined Westpac in 2008. One of the notable strategy that Kerry adopted while she was the Westpac CEO, was making women to occupy the first 40% of the Westpac’s managerial positions. Kerry motivation As the result of her performance while in Westpac, Kerry was highly remunerated. With fixed pay of $3 million per year in 2013 and $2.7 million in short-term bonuses, she put efforts to ensure that Westpac retained its competitive position (Card and Krueger 24). One of the advantages of providing high salaries to the top executives is that they are highly motivated thus providing an effective leadership to their organizations. CEOs such as Kerry provide a talent that is needed to produce the desired result in the organization. It is also worth to note that the responsibilities and skills that are related to the job of CEO for a company like Westpac is limited are extreme and the number of individuals who can fill these roles is limited. For example, few people could fit the skills possessed by Kerry and therefore she deserved to be paid the high salary she was awarded in addition to the $ 7 million worth of shares. Taking into consideration the positions that Kerry held in South Africa and Australia, she gained extensive knowledge that was useful in spearheading reforms in an organization. As a result, Westpac aim was to maintain her in the company thus paying her high salaries as compared to bosses in BHP and Rio Tinto companies. One of the impact of high salary and improved benefits that is given to the CEOs is that it indicates that the organization is performing. This implies that as compared to other companies in the banking sector, Westpac’s performance was high and thus it had the ability to give it top executive high salaries. Bonus and shares as source of motivation Currently, it is common for companies to provide their CEO with a salary of more than $1 million. This means that CEO receives terrific rewards any time the company performance improves. However, it is important to note that big salaries are not the only extrinsic factor that motivates the employees and the CEOs. Provision of bonuses in the form of shares offer a good opportunity of improving the performance of the CEO as well as to enhance the productivity of the workers. For example, with the improved performance of Westpac in 2013, Kerry was not only awarded high salaries but she received $7 million worth of shares as part of the long term bonus package. This made her total remuneration to increase to $12.7 million up from $9.6 million in 2012 (Michael 12). One of the most important point to note is that firm should be very careful once they are providing bonuses and shares to the top executives. While it is an effective motivating factor it should vary with the performance. For example, a CEO who receives a salary of $ 1 million may be given a bonus of $ 600,000 or similar worth of shares. But if the bonus does not vary with the performance, it implies that the top executive is earning a real salary of $1.6 million. Impact of high salaries One of the advantages of paying high salaries for example the one Kerry earned is that it makes the Chief Executive Officers to remain in the organization. For example, Kerry is paid higher salaries and benefits as compared to Mike Smith and Ian Narev the ANZ and Commonwealth Banks CEOs respectively. As a result, she has strong loyalty towards Westpac and she was hesitant to leave the bank. With the growing competition in the banking sector, companies should value not only their employees but also the top managers. This is based on the fact that bankers who leave one bank to another especially the ones that are established such as Westpac, are highly demanded due to their skills and experience. In the case of Kerry, Westpac could not afford to lose her since it is through her skills in the banking sector that the bank attained significant performance in 2013 (Michael 4). Similarly, Westpac competitors including Common Wealth and ANZ banks could target Kerry and offer her very high benefits at the expense of the customers in order to make her leave Westpac. Other competitors in foreign countries such as US and Britain could also target Kerry. On her part, Kerry is motivated to work for Westpac since she is a transformer who wants to make any organization she works in reach at the pick. Additionally, there is strong positive relationship between Kerry and Westpac, thus making the possibility of her termination of Westpac employment very low. As mentioned earlier, as one of the highest paid executives in Australia and across the world, Kerry level of motivation and productivity greatly improved (Ryan and Deci 14). Through the base salary, she was guaranteed security of her employment since she became aware that she will be paid no matter her performance. One aspect to note regarding the salary is that it is not proper for firms to raise it based on the time spent in the organization. Base salaries should be raised based on the performance of the workers an aspect that Westpac adopted in 2013. While increasing the salaries of the top executives and junior employees in order to motivate them, companies need to employ a number of tools (Vallerand 26). First, employees who are at the departmental level should be given a bonus or a benefit that is similar to the one given to the CEO even though it might not be equal. While it is important for CEO to be paid well, other employees should not be discriminated since the CEO needs junior employees since they are the one who undertake the activities of the company in the field and within the production facilities. For example, tellers and customer care representatives in Westpac are the once who meet the consumers and thus they provide the image of the company. This implies that the bank should also look at the welfare of other employees as the way of retaining a motivated team. Westpac’s corporate social responsibilities With the need to expand their markets, companies in the banking sector and other areas have invested in corporate social responsibilities. This has also happened to individual executives. For example, as a way of thanking the society for its support, Westpac donated $73,000 and $81,904 to the Labor Party and Liberals respectively. This is an indication that the bank is aware that the society plays a very important role in the development of any institution. Barclays on its part has embarked on sponsoring English Premier League an aspect that has made it image to improve globally. With the given stiff competition among the banks, it is essential for companies to create strong connection with all the stakeholders including the government, consumers, suppliers and investors among others. For the government, companies are required to use greener methods of production to reduce carbon emission. This is an approach that Westpac adopts making it to remain a competitive bank with the Australian economy. The consumers on the other hand expect the bank to be responsible and assist them with emergency loans in case they fell sick. Other activities that Westpac can use to improve its image locally and globally includes planting of trees, providing food donations to the poor people, and sponsoring cultural and social events among others. Works Cited Card, D and Krueger, B. Myth and measurement: The new economics of the minimum wage. Princeton: Princeton University Press, 1995. Print. Michael Bennet. 2013. Westpac CEO Gail Kelly takes pay cut - to $9.17m. 13 November, p4. Michael W. Gail Kelly quits: Westpac CEO Brian Hartzers real pay detailed in annual reports. Available from http://www.smh.com.au/business/comment-and-analysis/gail-kelly-quits-westpac-ceo-brian-hartzers-real-pay-detailed-in-annual-reports-20141113-11m5t9.html Ryan, R and Deci,L. Self-determination theory and the facilitation of intrinsic motivation, social development, and well-being. American psychologist 55 (1): 8–18 Vallerand, J. The Academic Motivation Scale: A Measure of Intrinsic, Extrinsic, and motivation in Education. Educational and Psychological Measurement, 52 Read More