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<p>How is it insulting? Is it not a matter of simple reality that employees are more incentivized to help themselves rather than their employers? Even if it isn’t true for every single employee, it certainly would seem to be true as a statistical aggregate. </p>
<p>Besides, if what I am saying is false and insulting, then why do so many firms pay part of their compensation in the form of stock options or restricted stock?* The phraseology that is usually used is that such compensation serves to ‘align incentives’ by having employees care about the future of the company. But why is that necessary at all if employees already care about their employer? </p>
<p>So it seems to me that you have two choices: (1)Employee incentives are indeed naturally unaligned (which would cause firms to behave irrationally) and so firms attempt to align those incentives through stock packages* or (2) Firms are irrationally wasting resources by devising such packages to align employee incentives that are already aligned anyway. Either way, firms are behaving irrationally.</p>
<p>*The major problem with such compensation packages is that they are largely ineffective for most lower-level employees, especially at the larger firms, for such employees have little individual impact upon the overall health of the firm. Let’s face it - if you’re a regular HR staffer at a giant firm such as GE, the impact of your performance on GE stock price is negligible. You could be the greatest HR staffer in history and the stock price could still plummet through the actions of people far more powerful than yourself. </p>
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<p>Whether they would or not is an empirical question, for you are presuming that firms as a whole behave rationally. If firms truly were rational, then you would expect that firms would have long ago recognized that Stanford inflates its engineering grades relative to MIT and hence would require higher GPA’s from Stanford graduates relative to MIT graduates. But many don’t, and instead implement a universal 3.0 GPA screen across the board, regardless of which school you came from. </p>
<p>I said it before and I’ll say it again: firm traditions/cultures/rituals take on a life of their own and therefore exhibit great, sometimes permanent, longevity. One plausible narrative is that HR implements a GPA screen simply to shield themselves from attack from top management by demonstrating that HR is enforcing ‘high’ quality standards. That top management almost always consists of older people who themselves were college educated during the days prior to widespread HASS grade inflation. If schools raised their grading, firms might not respond, because GPA screens may have well become institutionalized as a tradition. We should never automatically presume that firms will respond rationally. {As a contemporary case in point, why did Kodak not properly respond to the digital imaging challenge when they themselves had invented and patented much of the digital technology, and when numerous commentators and investors had for more than a decade pointedly advised them to shift to digital? The evidence indicates that the Kodak employee culture continued to be enamored with analog film as a decades-long tradition. Now they’re bankrupt and many of those employees are likely to lose their jobs, pensions and health benefits.} </p>
<p>But even if firms did respond rationally by raising their GPA screensto schools raising their engineering GPA’s, so what? At least then engineering students would not be hurt through deficient GPA’s if they wanted to pursue other careers (i.e. med school, law school). And the ‘incompetent’ engineers who you so fear would still be screened out. So it seems as if we have a clear winning move: we have everything to gain and nothing to lose. So why not do it?</p>