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 Contents    vii

PREPARING FOR MY CAREER 104

■■ COMPENSATION IN ACTION 104
■■ CASE 1: Individual or Team Reward? 105
■■ CASE 2: Ethics Dilemma: Incentive Pay Gone Wrong 106
■■ CRUNCH THE NUMBERS! Calculating Profit Sharing Pay Awards 106
■■ WORKING TOGETHER: Team Exercise 106
• Endnotes 107

Chapter 5 Person-Focused Pay 109

Defining Person-Focused Pay: Pay-For-Knowledge, Skill-Based Pay, and
Competency-Based Pay 109
Knowledge-Based Pay and Skill-Based Pay 110
Competency-Based Pay and the Competency Model Clearinghouse 111
Usage of Person-Focused Pay Programs 112
Reasons to Adopt Person-Focused Pay Programs 114
Varieties of Person-Focused Pay Programs 116
Contrasting Person-Focused Pay with Job-Based Pay 120
Advantages and Disadvantages of Person-Focused Pay Programs 121
Advantages 121
Disadvantages 123
PREPARING FOR EXAMS/QUIZZES 124
Chapter Summary by Learning Objectives 124 • Key Terms 124 •
Discussion Questions 125
PREPARING FOR MY CAREER 125
■■ COMPENSATION IN ACTION 125
■■ CASE 1: Person-Focused Pay at Mitron Computers 125
■■ CASE 2: Ethics Dilemma: Limiting Access to Training 126
■■ CRUNCH THE NUMBERS! Hiring a Mix of Entry-Level Workers and Skilled
Candidates under a Skill-Based Pay Program 126
■■ WORKING TOGETHER: Team Exercise 127
• Endnotes 127

Part III Designing Compensation Systems 129

Chapter 6 Building Internally Consistent Compensation Systems 130
Internal Consistency 130
Job Analysis 132
Steps in the Job Analysis Process 132
Legal Considerations for Job Analysis 137
Job Analysis Techniques 138
Occupational Information Network (O*NET) 138
Job Evaluation 142
Compensable Factors 142
The Job Evaluation Process 144
Job Evaluation Techniques 145
The Point Method 146
Alternative Job-Content Evaluation Approaches 149
Alternatives to Job Evaluation 150
viii    Contents

Internally Consistent Compensation Systems and Competitive Strategy 150

PREPARING FOR EXAMS/QUIZZES 151
Chapter Summary by Learning Objectives 151 • Key Terms 151 •
Discussion Questions 152
PREPARING FOR MY CAREER 152
■■ COMPENSATION IN ACTION 152
■■ CASE 1: Job Evaluation at Smith Upholstery 153
■■ CASE 2: Ethics Dilemma: Stop Complaining or Else 154
■■ CRUNCH THE NUMBERS! Modifying a Job Evaluation Worksheet 154
■■ WORKING TOGETHER: Team Exercise 155
• Endnotes 155

Chapter 7 Building Market-Competitive Compensation Systems 156

Market-Competitive Pay Systems: The Basic Building Blocks 156
Compensation Surveys 157
Preliminary Considerations 157
Using Published Compensation Survey Data 158
Compensation Surveys: Strategic Considerations 161
Compensation Survey Data 163
Updating the Survey Data 170
Integrating Internal Job Structures With External Market
Pay Rates 170
Compensation Policies And Strategic Mandates 173
Pay Level Policies 173
Pay Mix Policies 174
PREPARING FOR EXAMS/QUIZZES 175
Chapter Summary by Learning Objectives 175 • Key Terms 176 •
Discussion Questions 176
PREPARING FOR MY CAREER 176
■■ COMPENSATION IN ACTION 176
■■ CASE 1: Nutriment’s New Hires 177
■■ CASE 2: Ethics Dilemma: A Slanted Wage Proposal 178
■■ CRUNCH THE NUMBERS! Updating Salary Survey Data 179
■■ WORKING TOGETHER: Team Exercise 179
• Endnotes 180

Chapter 8 Building Pay Structures that Recognize Employee

Contributions 181
Constructing a Pay Structure 181
Step 1: Deciding on the Number of Pay Structures 182
Step 2: Determining a Market Pay Line 183
Step 3: Defining Pay Grades 183
Step 4: Calculating Pay Ranges for Each Pay Grade 183
Step 5: Evaluating the Results 188
Designing Merit Pay Systems 189
Merit Increase Amounts 190
Timing 191
Recurring versus Nonrecurring Merit Pay Increases 191
 Contents    ix

Present Level of Base Pay 191

Rewarding Performance: The Merit Pay Grid 191
Merit Pay Increase Budgets 193
Designing Sales Incentive Compensation Plans 195
Alternative Sales Compensation Plans 195
Sales Compensation Plans and Competitive Strategy 197
Determining Fixed Pay and the Compensation Mix 198
Designing Person-Focused Programs 199
Establishing Skill Blocks 199
Transition Matters 200
Training and Certification 201
In-House or Outsourcing Training 201
Pay Structure Variations 202
Broadbanding 202
Two-Tier Pay Structures 204
PREPARING FOR EXAMS/QUIZZES 205
Chapter Summary by Learning Objectives 205 • Key Terms 206 •
Discussion Questions 206
PREPARING FOR MY CAREER 206
■■ COMPENSATION IN ACTION 206
■■ CASE 1: A New Sales Representative 207
■■ CASE 2: Ethics Dilemma: Arbitrary Compa-ratios 208
■■ CRUNCH THE NUMBERS! Calculating Pay Range Minimums, Maximums, and
Pay Range Overlap 208
■■ WORKING TOGETHER: Team Exercise 209
• Endnotes 209

Part IV Employee Benefits 211

Chapter 9 Discretionary Benefits 212
Origins of Discretionary Benefits 212
Categories of Discretionary Benefits 214
Protection Programs 214
Paid Time Off 219
Services 222
Legislation Pertinent to Discretionary Benefits 226
Internal Revenue Code 226
Employee Retirement Income Security Act of 1974 (ERISA) 226
Pension Protection Act of 2006 228
Designing and Planning the Benefits Program 228
Determining Who Receives Coverage 229
Financing 229
Employee Choice 229
Cost Containment 229
Communication 230
The Benefits and Costs of Discretionary Benefits 231
PREPARING FOR EXAMS/QUIZZES 232
Chapter Summary by Learning Objectives 232 • Key Terms 233 •
Discussion Questions 234
x    Contents

PREPARING FOR MY CAREER 234

■■ COMPENSATION IN ACTION 234
■■ CASE 1: Employee Benefits that Matter 235
■■ CASE 2: Ethics Dilemma: A Poor Bid 235
■■ CRUNCH THE NUMBERS! Calculating Employer Matching Contributions 236
■■ WORKING TOGETHER: Team Exercise 236
• Endnotes 237

Chapter 10 Legally Required Benefits 239

Origins of Legally Required Benefits 239
Categories of Legally Required Benefits 240
Social Security Programs 240
Workers’ Compensation 245
Family and Medical Leave 246
State and Local Paid Leave Laws 247
Health Insurance 248
Health Insurance Program Design Alternatives 249
Fee-For-Service Plans 250
Managed-Care Approach 251
Features of Health Care Plans 252
Specialized Insurance Benefits 253
Consumer-Driven Health Care 254
Additional Health Care Legislation 255
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) 255
Health Insurance Portability and Accountability Act of 1996 (HIPAA) 256
The Benefits and Costs of Legally Required Benefits 256
PREPARING FOR EXAMS/QUIZZES 258
Chapter Summary by Learning Objectives 258 • Key Terms 258 •
Discussion Questions 259
PREPARING FOR MY CAREER 259
■■ COMPENSATION IN ACTION 259
■■ CASE 1: Social Security and Retirement Planning at ­Taylor Foods 260
■■ CASE 2: Ethics Dilemma: Go with the High-Deductible Health Plan 261
■■ CRUNCH THE NUMBERS! Calculating Federal Insurance Contributions Act
(FICA) Taxes 261
■■ WORKING TOGETHER: Team Exercise 262
• Endnotes 262

Part V Contemporary Strategic Compensation Challenges 263

Chapter 11 Compensating Executives 264
Contrasting Executive Pay with Pay for Nonexecutive Employees 264
Defining Executive Status 265
Who are Executives? 265
Key Employees 265
Highly Compensated Employees 267
Executive Compensation Packages 267
Components of Current Core Compensation 267
Components of Deferred Core Compensation 269
 Contents    xi

Equity Agreements 269

Separation Agreements 271
Clawback Provisions 272
Employee Benefits: Enhanced Protection Program Benefits and Perquisites 272
Principles and Processes for Setting Executive Compensation 274
The Key Players in Setting Executive Compensation 274
Theoretical Explanations for Setting Executive Compensation 275
Executive Compensation Disclosure Rules 276
Securities and Exchange Act of 1934 277
Wall Street Reform and Consumer Protection Act of 2010 (­Dodd-Frank Act) 279
Executive Compensation: Are U.S. Executives Paid too Much? 282
Comparison between Executive Compensation and Compensation for Other Worker
Groups 282
Strategic Questions: Is Pay for Performance? 282
Ethical Considerations: Is Executive Compensation Fair? 283
International Competitiveness 284
PREPARING FOR EXAMS/QUIZZES 286
Chapter Summary by Learning Objectives 286 • Key Terms 286 •
Discussion Questions 287
PREPARING FOR MY CAREER 287
■■ COMPENSATION IN ACTION 287
■■ CASE 1: Building an Executive Compensation Package 288
■■ CASE 2: Ethics Dilemma: Resistance to Clawback CEO ­Severance Pay at
United Airlines 289
■■ CRUNCH THE NUMBERS! Comparison of Pay Within and Across
Industries 289
■■ WORKING TOGETHER: Team Exercise 290
• Endnotes 290

Chapter 12 Compensating the Flexible Workforce: Contingent

Employees and Flexible Work Schedules 293
The Contingent Workforce 293
Groups of Contingent Workers 294
Reasons for U.S. Employers’ Increased Reliance on Contingent Workers 299
Pay and Employee Benefits for Contingent Workers 301
Part-Time Employees 301
Temporary Employees 302
Leased Workers 303
Independent Contractors, Freelancers, and Consultants 304
Flexible Work Schedules: Flextime, Compressed Workweeks, and
Telecommuting 307
Flextime Schedules 307
Compressed Workweek Schedules 308
Telecommuting 308
Flexible Work Schedules: Balancing the Demands of Work Life and Home Life 309
Pay and Employee Benefits for Flexible Employees 309
Pay 309
Employee Benefits 310
Unions’ Reactions to Contingent Workers and Flexible Work Schedules 311
xii    Contents

Strategic Issues and Choices in Using Contingent and Flexible Workers 311
PREPARING FOR EXAMS/QUIZZES 312
Chapter Summary by Learning Objectives 312 • Key Terms 313 •
Discussion Questions 314
PREPARING FOR MY CAREER 314
■■ COMPENSATION IN ACTION 314
■■ CASE 1: Telecommuting at MedEx 315
■■ Case 2: Ethics Dilemma: Cost Savings at the Expense of ­Employees 315
■■ CRUNCH THE NUMBERS! Calculating the Costs of Full-Time and
Part-Time ­Employment 316
■■ WORKING TOGETHER: Team Exercise 316
• Endnotes 317

Part VI Compensation Issues Around the World 319

Chapter 13 Compensating Expatriates 320
Competitive Advantage and How International Activities Fit in 321
Lowest-Cost Producers’ Relocations to Cheaper Production Areas 321
Differentiation and the Search for New Global Markets 321
How Globalization is Affecting HR Departments 322
Complexity of International Compensation Programs 323
Preliminary Considerations 323
Host Country Nationals, Third Country Nationals, and Expatriates: Definitions and Relevance
for Compensation Issues 323
Term of International Assignment 324
Staff Mobility 324
Equity: Pay Referent Groups 324
Components of International Compensation Programs 324
Setting Base Pay for U.S. Expatriates 324
Methods for Setting Base Pay 325
Purchasing Power 326
Incentive Compensation for U.S. Expatriates 326
Foreign Service Premiums 327
Hardship Allowances 327
Mobility Premiums 328
Establishing Employee Benefits for U.S. Expatriates 328
Standard Benefits for U.S. Expatriates 329
Enhanced Benefits for U.S. Expatriates 330
Balance Sheet Approach for U.S. Expatriates’ Compensation Packages 331
Housing and Utilities 332
Goods and Services 333
Discretionary Income 333
Tax Considerations 333
Repatriation Pay Issues 334
PREPARING FOR EXAMS/QUIZZES 335
Chapter Summary by Learning Objectives 335 • Key Terms 335 •
Discussion Questions 336
PREPARING FOR MY CAREER 336
■■ COMPENSATION IN ACTION 336
 Contents    xiii

■■ CASE 1: Jenkins Goes Abroad 337

■■ CASE 2: Ethics Dilemma: Request Approved, then Denied 338
■■ CRUNCH THE NUMBERS! Calculating an Expatriate’s Base Pay and
Incentives 338
■■ WORKING TOGETHER: Team Exercise 338
• Endnotes 339

Chapter 14 Pay and Benefits Outside the United States 340

Pertinent Concepts for Quantifying Economic Elements in the Discussion of
Pay and Benefits Outside the United States 341
North America 342
Canada 343
Mexico 344
South America 345
Europe 346
Asia 348
India 348
People’s Republic of China 350
PREPARING FOR EXAMS/QUIZZES 352
Chapter Summary by Learning Objectives 352 • Key Terms 352 •
Discussion Questions 353
PREPARING FOR MY CAREER 353
■■ COMPENSATION IN ACTION 353
■■ CASE 1: Expanding Internationally at Suds Microbrewery 354
■■ CASE 2: Ethics Dilemma: Underpaying Workers at Serenity Resorts 354
■■ CRUNCH THE NUMBERS! Comparing the Rates of Change in GDP Per Capita
for S­ elect Countries 355
■■ WORKING TOGETHER: Team Exercise 356
• Endnotes 356

Epilogue 359
Epilogue Challenges Facing Compensation Professionals 360
Possible Increase to the Federal Minimum Wage Rate 361
Trends in Performance Appraisal 362
The Compensation-Productivity Gap 363
Gender Pay Gap 365
Pay Transparency 368
PREPARING FOR EXAMS/QUIZZES 369
Chapter Summary by Learning Objectives 369 • Key Terms 370 •
Discussion Questions 370
• Endnotes 370

Glossary 373
Author Index 387
Subject Index 389
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A01_PERL5624_08_GE_FM.indd 24 2/12/18 2:58 PM

Preface

NEW TO THIS EDITION

Strategic Compensation: A Human Resource Management Approach, Tenth Edition, contains
substantial new content and changes, including the following:

• Three new features appear in each chapter that enable students to integrate knowledge and
valuable skills regardless of whether they are choosing a career in the compensation pro-
fession or other business functions in smaller or larger organizations.
■■ Ethics Dilemma. Ethics is the discipline dealing
with what is good and bad, right and wrong, or
with moral duty and obligation. Most executives,
managers, and ­professionals believe that integrity
and ethical values have an important place in busi-
ness and should form the foundation of a compa-
ny’s culture. Ethics focuses on individual decision
making and behavior as well as the impact of
ethical choices on employee welfare. The ­Ethics
Dilemma, presented in the end-of-chapter mate-
rial, will keep these important matters in the fore-
front as you move ahead in your career.

■■ FYI. This feature provides tidbits of information from survey

research and extensive databases (e.g., employment statistics)
that illustrates trends, opinions, and the use of specific compen-
sation practices.

■■ Working Together. This feature offers opportu-

nities for students to collaborate through sharing
ideas, listening to others’ ideas, and coming up
with a cohesive team response to the assignment.

• Other major updates to the tenth edition include:

■■ Extend coverage of evolving compensation practices, statistics, and business profes-

sionals’ perspectives. For instance, Chapter 3 (Traditional Bases for Pay: Seniority and
Merit) includes a section on trends in performance appraisal practice. In a nutshell, some
companies are providing performance feedback more frequently and as needed on a less
structured basis rather than putting off providing feedback until structured annual reviews
are given. This section also addresses the pros and cons of this more contemporary think-
ing as well the same for longstanding approaches to provide students a balanced view.
■■ Chapter 15 has been converted into an Epilogue. It includes many important topics not

covered in previous editions and makes significant updates to other topics. Some of the
topics are the compensation productivity gap, the gender pay gap, and pay transparency.
■■ Fifty percent of the Cases and nearly fifty percent of the Crunch the Numbers features
are new.
xv
xvi    Preface

SOLVING TEACHING AND LEARNING CHALLENGES

Increasingly, students expect to see the applicability of their coursework to life and work after
graduation. When the connection is not clear to students, many may lose interest and, perhaps,
choose to do as little as possible to earn a good enough grade on quizzes and exams. The choice
of pedagogical features and the writing style in this text would pique interest in the subject matter
and enhance learning and development of seven critical employability skills, which have been
discussed in the ‘Developing skills for your career’ section in this textbook.
Strategic Compensation: A Human Resource Management Approach provides the founda-
tion for building compensation systems in a variety of work organizations. The content of this
textbook establishes the structure and design elements of compensation systems in a forward-
looking framework that addresses decision making that supports companies’ strategic plans. This
approach, therefore, positions compensation practice as essential and compensation professionals
as business partners. Individuals who pursue careers outside the compensation field will under-
stand how to interact with compensation professionals for promoting effective recruitment, moti-
vation, and retention of talent. This textbook is readable with a conversational tone and clear
explanations for concepts and practices. It conveys the relevance of compensation system design
overall as well as individual topics for organizations and aspiring professionals; and, this textbook
takes on contemporary topic coverage in every chapter.
I approach the study of compensation in a realistic, practical, interesting, and stimulating
manner. I focus on showing how compensation is practiced in the real world. Throughout the
book, you will see examples of how organizations practice compensation management. In explain-
ing a concept, I often quote compensation professionals and other business professionals, yet all
compensation discussion is based on sound theoretical concepts and practice. Where appropri-
ate, the strategic role of compensation is apparent, particularly in Chapter 1. In addition, I show
how compensation practices are related to other Human Resource Management (HRM) topics.
For instance, a firm that emphasizes recruiting top-quality candidates but neglects to provide
satisfactory compensation is wasting time, effort, and money. If a firm’s compensation system
pays below-market wages, the firm will always be hiring and training new employees only to see
the best leave for a competitor’s higher wages. Besides this one example, the interrelationship of
compensation practices set in a dynamic business environment will become more obvious as these
topics are addressed throughout the book. These interrelationships are also shown to be important
as organizations operate within the global environment. I included several features that appear
in the textbook and MyLab (some of which are listed and discussed below) to actively engage
students in the learning experience.
To improve student results, I recommend pairing the text content with MyLab Manage-
ment, which is the teaching and learning platform that empowers you to reach every student. By
combining trusted author content with digital tools and a flexible platform, MyLab personalizes
the learning experience and will help your students learn and retain key course concepts while
developing skills that future employers are seeking in their candidates. From Videos to Personal
Inventory Assessments, MyLab Management helps you teach your course, your way. Learn more
at www.pearson.com/mylab/management.

Chapter Warm-Ups
Chapter Warm-Up assessment helps you hold your students accountable
for learning key ­concepts in each chapter. These questions can be assigned
to the students ahead of time and will ensure that they are coming to class
prepared.
 Preface    xvii

Crunch the Numbers Exercises

Crunch the Numbers provide an excellent oppor-
tunity to sharpen problem solving skills through
the analysis of numerical data, creating the foun-
dation for quantifying compensation concepts
and practices. There are two data-driven exer-
cises per chapter, one in the book and both in
MyLab Management. Answers are found in the
Instructors Manual and in MyLab Management.

Chapter Quizzes
A powerful tool used to assess your students understanding
of the chapter learning objective after studying the chapter.
After reading the chapter, these questions can be assigned to
the ­students to test the knowledge they gained for respective
topic(s).

Videos Exercises
Video exercises are available for select chapter topics to help
engage students and hold them accountable for their learning.
A video clip can be assigned to students for outside classroom
viewing or it can be watched in the classroom. The video corre-
sponds to the chapter mate-
rial and is accompanied by
multiple choice questions
that reinforce student’s com-
prehension of the chapter
content.
xviii    Preface

Cases
Additional Supplemental cases are available in the
MyLab to complement cases in the book. These cases
help to keep students actively engaged and improve
skills like problem solving and decision making.

Personal Inventory Assessments (PIA)

PIA is a collection of online exercises designed to promote
self-­reflection and engagement for students. It enhances
their ability to connect with concepts taught in principles of
management, organizational behavior, and human resource
management classes. Students learn better when they con-
nect what they are learning to their personal experiences.
Instructors can assign and track students’
completion of the assessments. Student results
include a written explanation along with a graphic
display that shows how their results compare with
the class as a whole. Instructors also have access
to this graphic representation of results to promote
classroom discussion.
 Preface    xix

Compensation in Action
Compensation in Action explains how compensation
professionals and managers throughout an organization
work together to address important workplace issues.
This feature highlights some of the specific connections
between managers and compensation professionals, and
the reality that compensation activities are never per-
formed in isolation.

Working Together Exercises

As noted earlier, Working Together offers opportunities for students to collaborate through sharing
ideas, listening to others’ ideas, and coming up with a cohesive team response to the assignment.
If assigned by the instructor, students may make brief oral presentations of their ideas to the class,
creating an additional opportunity for working together.

Building Strategic Compensation Systems ­Project

Building Strategic Compensation Systems Project is an experiential case, available online in MyLab
Management. It allow students to work in small compensation consulting teams charged with the
responsibility for developing a compensation
plan for a company named e-sonic. The project
is divided into four sections. The first section,
Strategic Analysis, is described fully in the
casebook for faculty and students who choose
to complete this optional analysis of the busi-
ness environment prior to the remaining three
sections that directly address compensation
system design, as it relates to Chapter 1 of the
textbook. Section two relates to Chapter 6 of
the book and introduces students to the speci-
fication of internally consistent job structures.
Section three relates to Chapter 7 of this book
and shifts students’ focus outside of their firm
to understand its relationship with the external
marketplace. Finally, in Section four, students
will recognize the contributions of employees through the creation of a merit-pay system and put
their plan into action by paying employees within their firm. This section relates to Chapters 2
through 5, 8 through 9 in the book.

DEVELOPING EMPLOYABILITY SKILLS

For students to succeed in a rapidly changing job market, they should be aware of their career
options and how to go about developing a variety of skills. In this book and MyLab, students will
have the opportunity to develop and practice seven important skills based on various learning fea-
tures that are summarized in the matrix (given on the following page) and subsequently illustrating
some of the connections between the employability skills and learning features:
xx    Preface

Critical Thinking

Computing Skills
Application and
Communication

Technology and
Business Ethics

Responsibility
Collaboration

Data Literacy
Information
Knowledge

and Social
Analysis
FYI ✓ ✓
Watch It! ✓ ✓
Personal Inventory Assessment ✓ ✓
Compensation in Action ✓ ✓ ✓
Case (end-of-chapter) ✓ ✓ ✓
Ethics Dilemma ✓ ✓ ✓
Crunch the Numbers! ✓ ✓ ✓ ✓
Working Together: Team Exercise ✓ ✓ ✓
Building Strategic Compensation ✓ ✓ ✓ ✓ ✓ ✓
Systems (accompanying case)

INSTRUCTOR TEACHING RESOURCES

Strategic Compensation comes with the following teaching resources.
Supplements available to i­nstructors
at www.pearsonhighered.com/irc Features of the Supplement
Instructor’s Manual • Chapter-by-chapter summaries
authored by Lori Long • Examples and activities not in the main book
• Teaching outlines
• Solutions to all questions and problems in the book
Test Bank More than 650 multiple-choice, true/false, short-answer, and graphing questions
authored by Angela Boston with these annotations:
• Difficulty level (1 for easy, 2 for moderate, 3 for difficult)
• Type (Multiple-choice, true/false, short-answer, essay)
• Topic (The term or concept the question supports)
• Learning objective
• AACSB learning standard (Written and Oral Communication, Ethical
Understanding and Reasoning; Analytical Thinking; Information Technology;
Diverse and Multicultural Work; Reflective Thinking; Application of Knowledge;
Interpersonal Relations and Teamwork)
Computerized TestGen© TestGen allows instructors to:
• Customize, save, and generate classroom tests
• Edit, add, or delete questions from the Test Item Files
• Analyze test results
• Organize a database of tests and student results.
PowerPoints Slides include many of the figures and tables in the textbook
authored by Patricia Buhler PowerPoints meet accessibility standards for students with disabilities. Features
­include, but are not limited to:
• Keyboard and Screen Reader access
• Alternative text for images
• High color contrast between background and foreground colors
 Preface    xxi

ACKNOWLEDGMENTS
I thank the multitude of course instructors and students who have used past editions of my book.
Their invaluable insights and constructive feedback has helped me to improve both the instructor’s
teaching and students’ learning experiences.
At Pearson, I wish to thank my editor, Neeraj Bhalla for championing this edition and provid-
ing support throughout the revision process. Many others at Pearson provided expert advice and
project management oversight, including my content producers, Shweta Jain and Sugandh Juneja.
At SPi Global, I thank Bhanuprakash Sherla and his colleagues for their expert oversight of the
process and keen eye for details.

ABOUT THE AUTHOR

Joseph J. Martocchio
My interest in the human resource management field began while
I was a junior at Babson College and in compensation, particu-
larly, while I was a first-year graduate student at Michigan State
University. I found myself wanting to practice in the field as well
as to become a university professor and researcher. I pursued
both professional desires starting with employment at Cameron
and Colby (a reinsurance company) in Boston and General Elec-
tric’s Aerospace business group in Valley Forge, Pennsylvania.
I advanced my education in the human resource management
(HRM) field by earning a master’s degree and Ph.D. degree at
Michigan State University. My master’s degree enabled me to build
an even stronger foundation in practice and my doctoral degree
provided me with the skills to conduct scholarly research and teach
college-level courses. Since earning my graduate degrees, I have
been a professor in the School of Labor and Employment Rela-
tions at the University of Illinois, Urbana–Champaign and assumed administrative roles as a Provost
Fellow, Associate Dean for Academic Affairs, and Interim Dean. All the while, I have taught a variety
of courses in the HRM field. These include compensation systems, employee benefits, employment
systems (HRM and labor relations), HR planning and staffing, and statistics. I also teach the com-
pensation and statistics courses online. For many years, I served as the faculty advisor to the student
chapter of the Society for Human Resource Management at the University of Illinois during which
time students earned Merit Awards and Superior Merit awards on multiple occasions.
As a researcher, I have studied a variety of topics that include employee absenteeism,
employee training and development, compensation systems, employee benefits, and generational
diversity. My work appears in leading scholarly journals such as Academy of Management Jour-
nal, Academy of Management Review, Journal of Applied Psychology, Journal of Management,
and Personnel Psychology. I received the Ernest J. McCormick Award for Distinguished Early
Career Contributions from the Society for Industrial and Organizational Psychology (SIOP),
and I was subsequently elected as a Fellow in both the American Psychological Association and
SIOP. Following the attainment of this recognition, I served as the Chair of the HR Division of
the Academy of Management as well as in various other leadership roles within that organization.
In 2018, a study in the Academy of Management Learning and Education revealed that I am
in the top one percent of the most influential HRM authors out of a total of 9,744. Besides writ-
ing scholarly articles and Strategic Compensation: A Human Resource Management Approach,
I have two additional sole-authored textbooks: Human Resource Management (Pearson Higher
Education), 15th edition, and Employee Benefits: A Primer for Human Resource Professionals
(McGraw-Hill), 6th edition.
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A01_PERL5624_08_GE_FM.indd 24 2/12/18 2:58 PM

SETTING THE STAGE FOR
STRATEGIC COMPENSATION I

CHAPTER 1 STRATEGIC COMPENSATION

CHAPTER 2 CONTEXTUAL INFLUENCES ON COMPENSATION PRACTICE

MyLab Management
You can access the CompAnalysis Software to complete the online Building Strategic
Compensation Systems Project by logging into www.pearson.com/mylab/management.

1
 Strategic Compensation
1 A Component of Human Resource Systems

Learning Objectives
When you finish studying this chapter, you should be able to:
1-1. Define strategic compensation.
1-2. Summarize the role of compensation as a strategic business partner.
1-3. Explain strategic compensation decisions.
1-4. Identify and discuss the building blocks and structural elements of strategic
compensation systems.
1-5. Describe the fit of the compensation function in organizations.
1-6. Identify the stakeholders of the compensation function and summarize their
stakes in the work compensation professionals perform.
1-7. Explore essential skills for developing your career in compensation or any other
career path.

CHAPTER WARM-UP!
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mylab/management to complete the Chapter Warm-Up! and see what you already
know. After reading the chapter, you’ll have a chance to take the Chapter Quiz! and see
what you’ve learned.

Through the early twentieth century, manpower planning was the predecessor to contemporary
human resource (HR) management. Manpower planning focused on the effective deployment
of employees in factories to achieve the highest manufacturing output per employee per unit of
time. That is, management sought to increase productivity (such as the number of handmade
garments per hour) while also maintaining or lowering employee compensation costs. All else
equal, higher employee productivity while maintaining or lowering employee compensation
costs contributed to higher profitability for the firm.
Through the decades, mounting government regulation involving payroll taxes and laws
centered on ensuring a minimum wage, prevailing wage, equal pay for equal work; and, equal
employment opportunity later gave rise to the personnel management function, of which com-
pensation was a component. Legal compliance necessitated that personnel management take on
the role of an administrative, support function to maintain compliance with the myriad details
of employment laws (e.g., determining prevailing wages in localities). Personnel management

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sword in his hand, and delivered one of those wild and ill-judged
philippics against the king which did so much mischief in the attempt
of Monmouth.
Altogether, so far the cause of William appeared as little promising
as that of Monmouth had done. Notwithstanding the many earnest
entreaties from men of high rank and of various classes—nobles,
bishops, officers of the army and navy,—a week had elapsed, and no
single person of influence had joined him. The people only, as in
Monmouth's case, had crowded about him with shouts of welcome.
William was extremely disappointed and chagrined; he declared that
he was deluded and betrayed, and he vowed that he would re-
embark, and leave those who had called for him to work out their
own deliverance, or receive their due punishment. But on Monday,
the 12th, his spirits were a little cheered by a gentleman of Crediton,
named Burrington, attended by a few followers, joining his standard.
This was immediately followed, however, by the news that Lord
Lovelace, with about seventy of his tenants and neighbours, had
been intercepted by the militia at Cirencester, taken prisoners, and
sent to Gloucester Castle. The slow movement of the disaffected
appears to have originated in William's not having landed in
Yorkshire, as was expected, but in the west, where he was not
expected. In the North Lords Delamere and Brandon in Cheshire,
Danby and Lumley in Yorkshire, Devonshire and Chesterfield in
Derbyshire, in Lancashire the Earl of Manchester, in Nottinghamshire
and Lincolnshire Rutland and Stamford, and others were all waiting
to receive him. The very army which had been encamped on
Hounslow Heath was the seat of a secret conspiracy of officers, with
Churchill himself at their head, who kept up constant communication
with the club at the "Rose" tavern in Covent Garden, of which Lord
Colchester was president. But all this concert was paralysed for a
time by William's appearance in so distant a quarter.
But the elements of revolt, which had suffered a momentary shock,
now began to move visibly. The very day that Lord Lovelace was
captured, Lord Colchester marched into Exeter, attended by about
seventy horse, and accompanied by the hero of "Lillibullero,"
Thomas Wharton. They were quickly followed by Russell, the son of
the Duke of Bedford, one of the earliest promoters of the revolution,
and still more significantly by the Earl of Abingdon, a staunch Tory,
who had supported James till he saw that nothing but the reign of
Popery would satisfy him. A still more striking defection from the
king immediately followed. Lord Cornbury, the eldest son of the Earl
of Clarendon, pretended to have received orders to march with three
regiments of cavalry stationed at Salisbury Moor, to the enemy in the
west. He was a young man entirely under the influence of Lord
Churchill, having been brought up in the household of his cousin, the
Princess Anne, where Churchill and his wife directed everything; and
there can be no doubt that this movement was the work of Churchill.
As the cavalry proceeded from place to place by a circuitous route to
Axminster, the officers became suspicious, and demanded to see the
orders. Cornbury replied that his orders were to beat up the quarters
of the army in the night near Honiton. The loyal officers, who had
received hints that all was not right, demanded to see the written
orders; but Cornbury, who had none to produce, stole away in the
dark with a few followers who were in the secret, and got to the
Dutch camp. His regiment, and that of the Duke of Berwick, James's
own (natural) son, with the exception of about thirty troops,
returned to Salisbury; but the third regiment, the Duke of St.
Albans', followed the colonel, Langton, to Honiton, where General
Talmash received them; and most of the officers and a hundred and
fifty privates declared for the prince, the rest being made prisoners,
but soon afterwards discharged.
The news of this defection of one so near to the king's family
created the greatest consternation in the palace. In his terror James
summoned a military council. He was anxious to receive the
assurances of fidelity from his other officers—as if any assurances,
under the circumstances, anything but leading them against the
enemy, could test the loyalty of these men. He told them that he
wished to be satisfied that there were no more Cornburys amongst
them; and that if any had scruples about fighting for him, he was
ready to receive back their commissions. Of course they protested
the most ardent devotion to his cause, though there was not a man
of them that was not already pledged to desert him. Churchill,
recently made a lieutenant-general, and the Duke of Grafton, the
king's nephew, were especially fervid in their expressions of loyalty;
so, too, were Trelawney, smarting secretly over the persecution of
his brother, the Bishop of Bristol, and the savage Kirke, who, when
James had importuned him to turn Papist, had replied that he "was
sorry, but he had already engaged to the Grand Turk that if he
changed his religion he would become a Mussulman." Reassured by
these hollow professions, James gave orders for joining the camp at
Salisbury; but the next morning, before he could set out, he was
waited on by a numerous deputation of lords spiritual and temporal,
with Sancroft at their head, praying that a free Parliament might be
immediately called, and communication opened with the Prince of
Orange.
James received the deputation ungraciously. In all his hurried
concessions he had still shown his stubborn spirit by refusing to give
up the Dispensing power; and now, though he declared that what
they asked he passionately desired, he added that he could not call
a Parliament till the Prince of Orange quitted the kingdom. "How," he
asked, "can you have a free Parliament whilst a foreign prince, at the
head of a foreign force, has the power to return a hundred
members?" He then fell foul of the bishops, reminding them that the
other day they refused to avow under their hands their disapproval
of the invasion, on the plea that their vocation was not in politics;
and yet here they were at the very head of a political movement. He
charged them with fomenting the rebellion, and retired, declaring to
his courtiers that he would not concede an atom. He then appointed
a council of five lords—of whom two were Papists, and the third
Jeffreys—to keep order during his absence, sent off the Prince of
Wales to Portsmouth to the care of the Duke of Berwick, the
commander, and set out for Salisbury. He reached his camp on the
19th of November, and ordered a review the next day at Warminster,
of Kirke's division. Churchill and Kirke were particularly anxious that
he should proceed to this review, and Kirke and Trelawney hastened
on to their forces, on pretence of making the necessary
preparations. On the other hand, Count de Roye as earnestly
dissuaded James from going to Warminster. He told him that the
enemy's advanced foot was at Wincanton, and that the position at
Warminster, or even that where they were at Salisbury, was
untenable. James, however, was resolved to go; but the next
morning, the 20th, he was prevented by a violent bleeding at the
nose, which continued unchecked for three days.

WILLIAM OF ORANGE ENTERING EXETER. (See p. 339.)

[See larger version]
Scarcely had this impediment occurred when news came that the
king's forces had been attacked at Wincanton, and worsted by some
of the division of General Mackay. James was now assured that, had
he gone to Warminster, he would have been seized by traitors near
his person, and carried off to the enemy's quarters. He was advised
to arrest Churchill and Grafton; but, with his usual imprudence, he
refused, and summoned them along with the other officers to a
military council, to decide whether they should advance or retreat.
Feversham, Roye, and Dumbarton argued for a retreat; Churchill
persisted in his recommendation of an advance to the post at
Warminster. The council lasted till midnight, when Churchill and
Grafton, seeing that their advice was not followed, felt the time was
come to throw off the mask, and therefore rode directly away to the
prince's lines. The next morning the discovery of this desertion filled
the camp with consternation, and this was at its height when it was
known that Churchill's brother, a colonel, Trelawney, Barclay, and
about twenty privates had ridden after the fugitives. It was said that
Kirke was gone too, but it was not the fact; and he was now
arrested for having disobeyed orders sent to him from Salisbury; but
he professed such indignation at the desertion of Churchill and the
others, that the shallow-minded king set him again at liberty. The
deserters were received by William with a most gracious welcome,
though Schomberg remarked of Churchill that he was the first
lieutenant-general that he had ever heard of running away from his
colours.
In James's camp all was confusion, suspicion, and dismay. There
was not a man who was sure of his fellow, and the retreat which
commenced more resembled a flight. Numbers who would have
fought had they been led at once to battle, now lost heart, and stole
away on all sides. The news that found its way every hour into the
demoralised camp was enough to ruin any army. From every quarter
came tidings of insurrection. The Earl of Bath, the Governor of
Plymouth, had surrendered the place solemnly to William; Sir
Edward Seymour, Sir William Portman, Sir Francis Warre—men of
immense influence in Devon, Somerset, and Dorset—were already
with William at Exeter; a paper had been drawn up and signed by
the leading persons there to stand by the prince, and, whether he
succeeded or whether he fell, never to cease till they had obtained
all the objects in his declaration; Delamere had risen in Chester, and
had reached Manchester on his way south; Danby had surprised the
garrison at York; the town had warmly welcomed him, and a great
number of peers, baronets, and gentlemen were in arms with him.
Devonshire had called together the authorities and people of Derby,
and published his reason for appearing in arms, calling on them to
assist all true men in obtaining a settlement of the public rights in a
free Parliament. At Nottingham he was met by the Earls of Rutland,
Stamford, Manchester, Chesterfield, and the Lords Cholmondeley
and Grey de Ruthyn.
These were tidings of a reaction as determined as James's
headstrong career had been; but the worst had not yet overtaken
him. On the evening of November 24th he had retreated towards
London as far as Andover. Prince George of Denmark, the husband
of the Princess Anne, and the Duke of Ormond, supped with him.
Prince George was a remarkably stupid personage, whose constant
reply to any news was, "Est-il possible?" When the intelligence of
one desertion after another came he had exclaimed, "Est-il
possible?" But the moment supper was over and the king gone to
bed, Prince George and Ormond rode off to the enemy too. When
James the next morning was informed of this mortifying news, he
coolly replied, "What! Is 'Est-il possible' gone too? Were he not my
son-in-law, a single trooper would have been a greater loss." With
the prince and Ormond had also fled Lord Drumlanrig, the eldest son
of the Duke of Queensberry, Mr. Boyle, Sir George Hewit, and other
persons of distinction. The blow was severe; and though James at
the first moment, being stunned, as it were, seemed to bear it with
indifference, he pursued his way to London in a state of intense
exasperation. There the first news that met him was the flight of his
own daughter Anne. Anne was bound up, soul and body, with the
Churchills, and it had no doubt been for some time settled amongst
them that they should all get away to the prince her brother-in-law.
It was towards evening of the same day that Anne fled that James
arrived at Whitehall, agitated by the awful desertions of his highest
officers and his nearest relatives. This announcement put the climax
to his torture. He exclaimed, "God help me! My very children have
forsaken me." Severe as the punishment of his desperate treason
against his people deserved to be, this certainly was a cruel fate. For
some days a lady near his person records that she thought she saw
in him occasional aberrations of intellect. That night he sat late in
council, and it was urged on him to call together such peers and
prelates as were in London to consult on the necessary steps in this
crisis. The next day came together nearly fifty peers and bishops,
and James asked their advice as to calling a Parliament. On this
head there appeared no difference of opinion; but Halifax,
Nottingham, and others, urged with equal earnestness that all
Catholics should be dismissed from office, and a general amnesty
published for all in arms against him. James assented to the calling a
Parliament, but his eyes were still not opened to the folly of his past
conduct, and he would give no assurance of dismissing the Papists,
and broke out into vehement language at the proposal to pardon his
enemies. "My lords," he said, "you are wonderfully anxious for the
safety of my enemies, but none of you troubles himself about my
safety." And he vowed that he would yet take vengeance on those
who had deserted him, and, above all, on Churchill. Clarendon, who
was on the eve of running off to William, took the opportunity to
utter the bitter feelings which his dismissal from the Lord-
Lieutenancy of Ireland to make way for Tyrconnel had no doubt long
left in his mind. He upbraided James with his dogged and incurable
Popery, with sacrificing everybody and everything for it; declaring
that, even at that moment, James was raising a regiment from which
Protestants were rigorously excluded. He taunted him with running
away from the enemy, and asked him who was likely to fight for him
when he himself was the first to flee.
After this severe treatment by his closest connections, James
appeared to comply with the advice of the lords. He sent for Halifax,
Nottingham, and Godolphin, and informed them that he had
appointed them Commissioners to treat with William. He dismissed
Sir Edward Hales from the Tower, and placed Bevil Skelton, a
Protestant, there. But the nature or the intention of this most obtuse
of bigots was by no means changed; he was internally as
determined as ever to reverse every concession on the first possible
occasion. Barillon tells us that he assured him that all this was a
mere feint; that he only sent the Commissioners to William in order
to gain time for sending his wife and child into France; that as to
calling a Parliament, that would only be to put himself into their
power, and compel him to submit to their conditions; that he had no
faith in his troops, except the Irish; none of the rest would fight for
him; and, therefore, as soon as the queen and young prince were
safe, he should get away to Ireland, Scotland, or France, and await
the turn of events. Such was the utterly hopeless character of the
Stuart race!
To clear the way for the escape of the royal infant, Lord Dover was
put in command at Portsmouth, and James sent orders to Lord
Dartmouth to see that the child was safely conveyed to the French
coast. In anticipation of the accomplishment of this object, he made
every preparation for his own flight. He sent to Jeffreys to bring the
Great Seal, and take up his quarters with it in the palace, lest by any
means it should fall into the hands of the invader, and thus give an
air of authority to his proceedings. But his escape was delayed by
unpleasant news from Lord Dartmouth. The announcement of the
calling of a Parliament, and of attempted agreement with the Prince
of Orange, had spread exultation through the navy, and the officers
had despatched an address of fervent thanks to James, when the
arrival of the infant prince awoke a general suspicion that all was still
hollow, and that James meant nothing but escape. The officers were
in great agitation, and plainly pointed out to Dartmouth his heavy
responsibility if he allowed the prince to quit the kingdom.
Dartmouth, therefore, wrote James, declaring that he would risk his
life for the support of the Crown, but that he dared not undertake to
facilitate the escape of the Prince of Wales. This was confounding
news, and James took instant measures for the return of his son to
London, and for his escape by another means to France.
Meanwhile William was gradually advancing towards the capital, and,
on the 6th of December, the king's Commissioners met him at
Hungerford, where they found the Earls of Clarendon and Oxford
already swelling the Court of the invader. They were received with
much respect, and submitted their master's proposal that all matters
in dispute should be referred to the Parliament for which the writs
were ordered, and that, in the meantime, the Dutch army should not
advance nearer than forty miles from London. The Whigs in William's
Court were decidedly averse from reconciliation with James, whose
implacable nature they knew; but William insisted on acceding to the
terms, on condition that the royal forces should remove the same
distance from the capital, and that the Tower of London and Tilbury
Fort should be put into the keeping of the City authorities. If it were
necessary for the king and prince to proceed to Westminster during
the negotiations, they should go attended only by a small guard.
Nothing could be fairer; but William knew well the character of his
father-in-law, and felt assured that he would by some means shuffle
out of the agreement, and throw the odium of failure on himself;
and he was not deceived. Never had James so fair an opportunity of
recovering his position and securing his throne, under constitutional
restraints, for his life; but he was totally incapable of such wisdom
and honesty.
On the very day that the royal Commissioners reached William's
camp, James received the Prince of Wales back from Portsmouth,
and prepared to send him off to France by another route. On the
night of the 10th of December he sent the queen across the Thames
in darkness and tempest, disguised as an Italian lady, and attended
by two Italian women, one of whom was the child's nurse, and the
other carried the boy in her arms. They were guarded by two French
refugees of distinction—Antonine, Count of Lauzun, and his friend
Saint Victor. They arrived safely at Gravesend, where a yacht
awaited them, on board of which were Lord and Lady Powis. Saint
Victor returned to inform James that they had got clear off, and in a
few hours they were safely in Calais.
Scarcely did Saint Victor bring the cheering news of the auspicious
sailing of the yacht, when the Commissioners arrived with the
conditions that had been agreed on by William. Here was the
guarantee for a speedy adjustment of all his difficulties; but the false
and distorted-minded James only saw in the circumstance a
wretched means of further deceit and contempt of his people and of
all honourable negotiation. He pretended to be highly satisfied,
summoned for the morrow a meeting of all the peers in town, and of
the Lord Mayor and aldermen, and directed that they should
deliberate freely and decide firmly for the good of the country. This
done, he retired to rest, ordered Jeffreys to be with him early in the
morning, said to Lord Mulgrave, as he bade him good night, that the
news from William was most satisfactory, and, before morning, had
secretly decamped, leaving his kingdom to take care of itself rather
than condescend to a pacification with his son-in-law and his
subjects, which should compel him to rule as a constitutional king.
But James was not satisfied with this contemptible conduct; he
indulged himself before going with creating all the confusion that he
could. Had the writs, which were preparing, been left for issue on
the 15th of January, 1689, a new Parliament would be in existence,
ready to settle the necessary measures for future Government; he
therefore collected the writs and threw them into the fire with his
own hands, and annulled a number which were already gone out, by
an instrument for the purpose. He also left a letter for Lord
Feversham, announcing his departure from the kingdom, and
desiring him no longer to expose the lives of himself and his soldiers
"by resistance to a foreign army and a poisoned nation;" then,
taking the Great Seal in his hand, he bade the Earl of
Northumberland, who was the Lord of the Bedchamber on duty, and
lay on a pallet bed in the king's room, not to unlock the door till the
usual hour in the morning, and then, disguised as a country
gentleman, disappeared down the back stairs. He was waited for by
Sir Edward Hales, whom he afterwards created Earl of Tenterden,
and they proceeded in a hackney-coach to Millbank, where they
crossed the river in a boat to Vauxhall. When in mid-stream, he flung
the Great Seal into the water, trusting that it would never be seen
any more; but it was afterwards dragged up by a fishing-net. James,
attended by Hales and Sheldon, one of the royal equerries, drove at
a rapid pace for Elmley Ferry, near the Isle of Sheppey, having relays
of horse ready engaged. They reached that place at ten in the
morning, and got on board the Custom House hoy which was
waiting for them, and dropped down the river.

JAMES HEARING OF THE LANDING OF WILLIAM OF ORANGE. (After the

Painting by E. M. Ward, R.A.)
[See larger version]
In the morning, when the Duke of Northumberland opened the
king's chamber door, and it was discovered that James had fled, the
consternation in the palace may be imagined. The courtiers and the
numbers of persons who were waiting to fulfil their morning duties,
and the lords who had been summoned to council, spread the
exciting tidings, and the capital became a scene of the wildest and
most alarming confusion. Feversham obeyed the orders of the king
left in his letter, without pausing to ask any advice, or to calculate
what might be the consequences. These were as serious as might
have been expected. There was no Government, no constituted
authority to appeal to. Lord Rochester had continued loyal to the
last; but the base desertion of James and the imminent danger at
once decided him. He bade the Duke of Northumberland muster the
Guards, and declare for William. The officers of the other regiments
in London followed the advice, and endeavoured to keep together
their men, declaring for the Prince of Orange. The lords who had
been summoned to Council hastened into the City to concert
measures with the Lord Mayor and aldermen for the public safety. A
meeting was hastily called in Guildhall, where the peers, twenty-five
in number, and five bishops, with Sancroft and the new Archbishop
of York at their head, formed themselves into a provisional council to
exercise the functions of Government till the Prince of Orange should
arrive, for whom they sent a pressing message, praying him to
hasten and unite with them for the preservation of the Constitution
and the security of the Church. The two Secretaries of State were
sent for, but Preston alone came; Middleton denied the authority of
the self-created Council. The Lieutenant of the Tower, Bevil Skelton,
was ordered to give up the keys to Lord Lucas, and an order was
sent to Lord Dartmouth, desiring him to dismiss all Popish officers
from the fleet, and attempt nothing against the Dutch fleet. But no
measures could prevent the outbreak of the mob in London. The
feeling against the Catholics displayed itself on all sides. Under
pretence of searching for Papists, the hordes of blackguards from
every low purlieu of London swarmed forth and broke into houses,
and plundered them at their pleasure. The vile Jeffreys was with
difficulty saved from the fury of the mob.
James, his heartless master, was also seized. The Custom House hoy
in which he embarked was found wanting in ballast, and the captain
was obliged to run her ashore near Sheerness. About eleven at night
on the 12th of December, before the hoy could be floated again by
the tide, she was boarded by a number of fishermen who were on
the look-out for fugitives, and the appearance of the king
immediately attracted their notice. "That is Father Petre," cried one
fellow; "I know him by his hatchet face." James was immediately
seized and searched; but, though he had his coronation ring in his
pocket, besides other jewels, they missed them, and did not
recognise him. They carried him ashore at Feversham, where, at the
inn, amid the insults of this rabble, he declared himself their king.
The Earl of Winchelsea, hearing of the king's detention, hastened to
his assistance, had him removed to the house of the Mayor, and sent
word of his capture to London.
When the countryman who carried the messages from Lord
Winchelsea arrived at Whitehall, the news of the king's detention
occasioned the greatest embarrassment. The lords had sent for
William, and hoped that they were well rid of the foolish king.
Nothing could have been easier than their course if James had got
over to the Continent. The throne would be declared vacant, and the
Prince and Princess of Orange invited to occupy it, on giving the
necessary guarantees for the maintenance of the Constitution. But
now the whole question was involved in difficulties. If James
persisted in his right to the throne, in what capacity was William to
be received? Could any safe measures be arranged with a man like
James? Was he to be deposed, and his son-in-law and daughter
forcibly placed on his throne? The dilemma was equally
embarrassing to the lords and prelates, and to the prince himself.
When the messenger was introduced, and delivered a letter from
James, but without any address, Halifax moved that they should
instantly adjourn, and thus leave the letter unnoticed. Halifax was
deeply incensed at the trick which James had played off upon him in
sending him to negotiate with William merely that he might get
away, and was now resolved to adhere to the prince; but Lord
Mulgrave prevailed on the lords to retain their seats, and obtained
from them an order that Lord Feversham should take two hundred
Life Guards, and protect the king from insult. Feversham demanded
the precise powers of his order, and was told that he must defend
the king from insult, but by no means impede the freest exercise of
his personal freedom. This meant that they would be glad if he
facilitated his escape. Halifax immediately left London, and joined
the Prince of Orange, who was now at Henley-on-Thames. Sancroft
and the clergy, as soon as they were aware that the king had not left
the country, retired from any further participation in the Council.
William and his adherents were extremely chagrined at this
untoward turn of affairs. When the messenger arrived at Henley he
was referred to Burnet, who said, "Why did you not let the king go?"
But when Feversham arrived at the town whose name he bore, the
king was no longer disposed to escape. His friends who had
gathered about him, Middleton and Lord Winchelsea especially, had
endeavoured to show him that his strength lay in remaining. Had he
vacated the throne by quitting the kingdom, it had been lost for
ever; but now he was king, and might challenge his right; and the
prince could not dispossess him without incurring the character of a
usurper, and throwing a heavy odium of unnatural severity on
himself and his wife. James had sufficient mind left to perceive the
strength thus pointed out to him. He resolved to return to his
capital, and from Rochester despatched Feversham with a letter to
William, whom he found advanced to Windsor, proposing a
conference in London, where St. James's should be prepared for the
prince. By this time William and his Council had determined on the
plan to be pursued in the great difficulty. He had calculated on
James's being gone, and had issued orders to the king's army and to
the lords at Whitehall in the style of a sovereign. His leading
adherents had settled amongst themselves the different offices that
they were to occupy as the reward of their adhesion. It was
resolved, therefore, if possible, to frighten James into a second
flight. No sooner had Feversham delivered his despatch than he was
arrested, and thrown into the Round Tower on the charge of having
disbanded the army without proper orders, to the danger of the
capital, and of having entered the prince's camp without a passport.
Zulestein was despatched to inform James that William declined the
proposed conference, and recommended him to remain at
Rochester.
James, however, was now bent on returning to London. He had not
waited for the prince's answer, but on Sunday, the 16th of
December, he entered his capital in a sort of triumphal procession.
He was preceded by a number of gentlemen, bareheaded. Immense
crowds assembled as if to welcome him back again. They cheered
him as he rode along. The bells were rung, and bonfires were lit in
the streets. Elated by these signs, as he imagined them, of returning
popularity, he no sooner reached Whitehall than he called around
him the Jesuits who had hidden themselves, stationed Irish soldiers
as guards around his palace, had grace said at his table by a Jesuit
priest, and expressed his high indignation at the lords and prelates
who had presumed to usurp his functions in his absence—who had,
in fact, saved the capital from destruction when he had abandoned
it. His folly, however, received an abrupt check. Zulestein was
announced, and delivered the stern message of William. James was
confounded, but again repeated his invitation for his nephew to
come to town, that they might settle all differences in a personal
conference. Zulestein coldly assured him that William would not
enter London whilst it contained troops not under his orders. "Then,"
said James, "let him bring his own guards, and I will dismiss mine,
for I am as well without any as such that I dare not trust." Zulestein,
however, retired without further discussion, and the moment he was
gone, James was informed of the arrest of Feversham.
Alarmed at these proofs of the stern spirit of William, James sent in
haste to Stamps and Lewis, the leading members of the City Council
—the Lord Mayor had never recovered his terror of Jeffreys'
presence,—to offer to place himself under their protection till all
necessary guarantees for the public liberties had been given and
accepted. But the Common Council had not had time to forget his
seizure of their charter, and they prudently declined to enter into an
engagement which, they said, they might not be able to fulfil. Whilst
James was thus learning that though the City acclamations might be
proofs of regret for his misfortunes, they were by no means proofs
of a desire for his continuing to reign, William, on the same day, the
17th, bade all his leading adherents hold a solemn council, to
consider what steps should be taken in this crisis. It was understood
that he would never consent to enter London whilst James was
there, and it was resolved that he should be removed to Ham House,
near Richmond, which the brutal Lauderdale had built out of the
bribes of Louis XIV. and the money wrung from the ravaged people
of Scotland. Halifax, Shrewsbury, and Delamere were despatched to
James with this intimation, though Clarendon had done all in his
power to have James seized and confined in some foreign fortress
till Tyrconnel surrendered Ireland to the prince's party.
Simultaneously with the three lords, William ordered his forces to
advance towards London. In the evening of the 17th James heard
that the Dutch soldiers had occupied Chelsea and Kennington. By
ten o'clock at night Solmes, at the head of three battalions of
infantry, was already making across St. James's Park, and sent word
that his orders were to occupy Whitehall, and he advised the Earl of
Craven, who commanded the Coldstream Guards, to retire. Craven—
though now in his eightieth year, was still possessed of the courage
and chivalry which he had displayed in the wars of Germany, and
which had won him the heart of Elizabeth of Bohemia, who was said
to be married to him—declared that, so long as he retained life, no
foreign prince should make a King of England a prisoner in his own
palace. James, however, ordered him to retire. The Coldstream
Guards withdrew, and the Dutch guards surrounded the palace.
James, as if there were no danger to his person, went composedly
to bed, but only to be roused out of his first sleep to receive the
deputation from the prince. On reading the letter proposing his
removal to Ham, which Halifax informed him must be done before
ten o'clock in the morning, James seems to have taken a final
resolve to get away. He protested against going to Ham, as a low,
damp place in winter, but offered to retire to Rochester. This was a
pretty clear indication of his intention to flee—the very object
desired. A messenger was despatched in all speed to the prince,
who returned with his full approbation before daybreak.
The morning of the 18th was miserably wet and stormy, but a barge
was brought to Whitehall Stairs, and the wretched monarch went on
board, attended by the Lords Arran, Dumbarton, Dundee, Lichfield,
and Aylesbury. The spectators could not behold this melancholy
abdication—for such it was—of the last potentate of a most unwise
line, who had lost a great empire by his incurable infatuation,
without tears. Even Shrewsbury and Delamere showed much
emotion, and endeavoured to soothe the fallen king; but Halifax,
incurably wounded in his diplomatic pride by the hollow mission to
the prince at Hungerford, stood coldly apart. Boats containing a
hundred Dutch soldiers surrounded his barge as it dropped down the
river. James landed and slept at Gravesend, and then proceeded to
Rochester, where he remained four days.
Though his advisers entreated him not to fly, James had now sunk
the last manly feeling of a monarch who would dare much and
sacrifice more to retain a noble empire for his family. A dastardly
fear that if he remained he would be put to death like his father took
possession of him. He made a last offer to the bishops, through the
Bishop of Winchester, as he had done to the City of London, to put
himself into their hands for safety, but they also declined the
responsibility, and he then gave all over as lost. On the evening of
the 22nd of December he sat down before supper, and wrote a
declaration of his motives for quitting the kingdom. About midnight
he stole quietly away with the Duke of Berwick, his natural son, and,
after much difficulty, through storm and darkness, reached a fishing
smack hired for the purpose, which, on Christmas Day, landed him at
Ambleteuse, on the coast of France. Thence he hastened to the
castle of St. Germains, which Louis had appointed for his residence,
and where, on the 28th, he found his wife and child awaiting him.
Louis also was there to receive him, had settled on him a revenue of
forty-five thousand pounds sterling yearly, besides giving him ten
thousand pounds for immediate wants. The conduct of Louis was
truly princely, not only in thus conferring on the fallen monarch a
noble and delightful residence, with an ample income, but in making
it felt by his courtiers and all France, that he expected the exiled
family to be treated with the respect due to the sovereigns of
England.
The flight of James had removed the great difficulty of William—that
of having recourse to some measure of harshness towards him, as
imprisonment, or forcible deposition and banishment, which would
have greatly lowered his popularity. The adherents of James felt all
this, and were confounded at the advantage which the impolitic
monarch had given to his enemies. The joy of William's partisans
was great and unconcealed. In France the success of William was
beheld with intense mortification, for it was the death-blow to the
ascendency of Louis in Europe, which had been the great object of
all his wars, and the expensive policy of his whole life. In Holland the
elevation of their Stadtholder to the head of the English realm was
beheld as the greatest triumph of their nation; and Dykvelt and
Nicholas Witsen were deputed to wait on him in London and
congratulate him on his brilliant success. But, notwithstanding all
these favourable circumstances, there were many knotty questions
to be settled before William could be recognised as sovereign. The
country was divided into various parties, one of which, including the
Tories and the Church, contended that no power or law could affect
the divine right of kings; and that although a king by his infamy,
imbecility, or open violation of the laws might be restrained from
exercising the regal functions personally, those rights remained
untouched, and must be invested for the time in a regent chosen by
the united Parliament of the nation. Others contended that James's
unconstitutional conduct and subsequent flight amounted to an
abdication, and that the royal rights had passed on to the next heir;
and the only question was, which was the true heir—the daughter of
James, the wife of William, or the child called the Prince of Wales?
The more determined Whigs contended that the arbitrary conduct of
the House of Stuart, and especially of James, who attempted to
destroy both the Constitution and the Church, had abrogated the
original compact between prince and people, and returned the right
of electing a new monarch into the hands of the people; and the
only question was, who should that choice be? There were not
wanting some who advised William boldly to assume the crown by
right of conquest; but he was much too wise to adopt this counsel,
having already pledged himself to the contrary in his Declaration,
and also knowing how repugnant such an assumption would be to
the proud spirit of the nation.
To settle these points he called together, on the 23rd of December,
the peers, all the members of any Parliament summoned in the reign
of Charles II. who happened to be in town, and the Lord Mayor and
aldermen, with fifty other citizens of London, at St. James's, to
advise him as to the best mode of fulfilling the terms of his
Declaration. The two Houses, thus singularly constituted, proceeded
to deliberate on the great question in their own separate
apartments. The Lords chose Halifax as their Speaker; the
Commons, Henry Powle. The Lords came to the conclusion that a
Convention was the only authority which could determine the
necessary measures; that in the absence of Charles II. a Convention
had called him back to the throne, and therefore a Convention in the
absence of James might exercise the same legitimate function.
When the Lords presented an address to this effect on the 25th,
William received it, but said it would be necessary to receive the
conclusion of the Commons before any act could take place. On the
27th the Commons came to the same decision, and William was
requested to exercise the powers of the executive till the Convention
should assemble.
In issuing orders for the election of the members of the Convention,
William displayed a most politic attention to the spirit of the
Constitution. He gave direction that no compulsion or acts of undue
persuasion should be exercised for the return of candidates; no
soldiers should be allowed to be present in the boroughs where the
elections were proceeding; for, unlike James, William knew that he
had the sense of the majority of the people with him. The same
measure was adopted with regard to Scotland. There, no sooner had
William arrived in England, than the people rose against James's
Popish ministers, who were glad to flee or conceal themselves.
Perth, the miserable renegade and tyrant, endeavoured to escape by
sea; he was overtaken, brought ignominiously back, and flung into
the prison of Kirkcaldy. The Papists were everywhere disarmed, the
Popish chapels were attacked and ransacked. Holyrood House, which
swarmed with Jesuits, and with their printing presses, was not
exempt from this summary visitation; and bonfires were made of all
sorts of Popish paraphernalia—crosses, books, images, and pictures.
William now called together such Scottish noblemen and gentlemen
as were in London, who adopted a resolution requesting him to call
a Convention of the Estates of Scotland, to meet on the 14th of
March, and in the meantime to take on himself the same executive
authority as in England. William was, therefore, the elected ruler of
the whole kingdom for the time. This power he proceeded to
exercise with a prudence and wisdom which were in striking contrast
to the antagonism of James. All parties and religions were protected
as subjects; Feversham was released, and the administration of
justice proceeded with a sense of firmness and personal security
which gave general confidence.
On the 22nd of January, 1689, the Convention met. The Lords again
chose Halifax as Speaker, the Commons, Powle. The Catholic lords
had not been summoned, and were not there. In the Lords, Bishop
Sherlock and a small knot of Tories were for recalling James, and
attempting the impossible thing of binding him to the Constitution;
another party, of which Sancroft was known to be the head, though
he had not the courage to go there and advocate it, were for a
regency; whilst Danby contended for proclaiming the Princess Mary
in her own right; and the Whigs were for nominating William as an
elective prince. In the Commons, similar parties appeared; but the
great majority were for declaring the throne vacant, and, on the
28th, they passed a resolution to that effect, and the next day
another, that no Popish king could possess the throne. These carried
up to the Lords were, after a debate of two days, also adopted, but
only by small majorities.
James now sent a letter to each House, declaring that he had not
abdicated, but had been compelled to withdraw by necessity; and he
offered to return and redress every grievance. Both Houses refused
to receive the letters; but in both the question as to who should be
the successor to the throne was violently debated. Lord Lovelace
and William Killigrew presented a petition to the Commons,
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