Section Fiveother than those that focus on low wages as an indirect cause
of turnover, which adversely affects firm performance.
However, there is substantially more evidence on the
impact of contingent compensation. A contrary view is provided
by the Vice President for People at Southwest Airlines who says
that her company does not believe in fancy compensation
programs. Noting that the company is 85 per-cent unionized,
she explains that these employees are paid on the basis of time
in grade and that they, like all Southwest employees, receive
profit sharing.^8 Thus, the bulk of compensation is unrelated to
performance. On the other hand, the remaining portion is
linked to the collective performance of all employees at this
high-performing company. The Southwest Airlines example
does not provide strong evidence that contingent compensation
is a universal best practice because its salaries are tied to
seniority and its contingent compensation (profit sharing) is just
one highly compatible component of the firm’s extraordinary
organizational culture.
Stock options and profit sharing, which are discussed
later in a separate section, provide other means of making a
portion of compensation contingent on the firm’s performance.
Many leading companies such as Microsoft, Bank of America,
Intel, Owens Corning, and Starbucks have adopted stock option
programs for all or very broad categories of employees, such as