Whether you are a shelf stocker at Walmart, a second-year associate at a consulting company, or an equity analyst at an investment bank, you may feel that you are not adequately compensated for the work you do; in other words, you are underpaid. But underpaid relative to what? How do employers determine compensation levels, and what consequences can these decisions have for an organization?

Indeed, many people think that compensation systems are broken, with some CEOs paid exorbitant sums that are not always related to their performance while lower-level employees are paid salaries that barely keep them above the poverty level.

An article on Bloomberg.com last month illustrates the gap between high- and low-wage earners in the United States. According to the article, in 2012, the average CEO compensation compared to that of rank-and-file workers was 204, up 20 percent since 2009. In other words, the average CEO made 204 times what the average worker earned in wages and benefits.

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