Fairness In Rewarding

Introduction
Assessments are made in everyday life about what is fair, which can sometimes be mundane that are hard for individuals to fully comprehend. For example, consider the recent issue on the unfairness of American International Group (AIG) towards the bonus payments made to their employees (Ritholtz, 2009). The payments done in the form of bonus was $165 million, but this is very less in comparison to $170 billion provided by the taxpayers. This problem of the fairness in allocation of funds is by no means new. Indeed, this is a basic problem faced by all organizations. According to Bazerman et al the definition of fairness in reward allocation is the representation of the degree of equality or equity through the parties’ payoffs that

whether to reward an individual or group. While equity boosts the performance of individuals, equality enhances the goal of the team (Kazemi and Eek, 2007). And while rewarding according to an individual performance creates dispersion in wages within a team and less collaboration within teams, rewarding based on a groups’ performance leads to free-riding of the team members (Lazear, 1998). The main factor that determines the apt rewarding scheme for teams is what allocation of incentives do members accept as fair (Tyler & Blader, 2000). The judging of individuals’ of what is fair allocation varies according the resource that is being distributed i.e. whether it is money or other resources. Through the existing research, the point is made that allocation on egalitarian basis is less fair when the resource distributed is money rather than other an in-kind

Both developed and developing countries alike have their gross domestic product redistributed through the transfers of in-kind goods like subsidizing houses (Currie & Gahvari, 2008). Another way of in-kind transfer is healthcare through which wealth can be redistributed (Reid, 2009). Even most of the organizations provide healthcare to their employees. In other words, it is rare that individuals’ performance differences are directly rewarded with better or worse health benefits. This is highly consistent with our study findings that people understand it as fair to allocate resources that have value in use equally among group members.

The differences between in-kind resources and money is (Waldfogel, 1993) due to the loss of value that happens when money is spend on a good instead of directly transferring the money, especially when the amount that the receiver of the in-kind good would spend their money to obtain the same good is significantly lower than it costs (Waldfogel,