Abstract:  TY-Digital, subsidiary of a large state-owned enterprise in the telecommunication industry, specializes in digital reading. In the early years of TY-Digital, the firm depends on its parent company for critical resources such as customer networks, and its management practices, notably those of reward and compensation, are strongly influenced by the parent company’s organizational structure and culture. In recent years, TY-Digital finds it imperative to adapt to an increasingly open and competitive free market, but its old compensation management system seems to get in the way. For instance, it is very difficult for TY-Digital to recruit or maintain skilled technicians using out-dated reward schemes. And while TY-Digital makes an effort to bias compensation in favor of newly recruited technicians, such an effort enrages many senior employees. It seems that workplace conflicts have emerged between new recruits and old employees which impact work performance of both parties in negative ways. Mr. Xiao, the general manager of TY-Digital, struggles to get the company out of its compensation management dilemma.

Keywords: compensation management, income distribution inequity, equity theory