Chapter 6: PSE&G Peer Companies and Operational Variables of Performance and Compensation

This chapter concerns itself with the development of a model for determination of the executive compensation of the PSE&G CEO. The data for this model consists of 18 comparable U.S. utility companies selected by the compensation committee of PSE&G and its advisors.

A major objective over the past several decades for organizations has been to increase efficiency by increasing productivity, lowering costs, and improving on the quality of the output, product, or service delivered (Klimberg, 1998; Klimberg et al., 2001). The efficiency of operation of any organization is the manner by which the organization selects and uses resources in order to produce its outputs. In general, the more output produced for a fixed amount of resources, the less wasteful, and therefore the more efficient and effective the operation. With increasingly competitive markets, the survival of an organization may likely depend on its efficiency, and in turn, how well the evaluation process produces the desired results.