Final answer:
The question explores factors influencing executive compensation levels, including government regulations and social pressures. Government rules can introduce additional complexities and costs for businesses, and with the shift in union dynamics, there might be less upward pressure on wages. Pay for performance compensation schemes are affected by various external and internal factors, balancing effort-based rewards and economic or regulatory constraints.
Step-by-step explanation:
The question relates to pay for performance compensation schemes and what factors have led to a decrease in executive compensation levels. In the context of labor market dynamics, government regulations can significantly impact the operations of a business, including compensation strategies. For example, regulations can introduce complexities for starting or expanding businesses, which might discourage firms from offering higher compensations or even hiring. Moreover, through zoning laws and other bureaucratic requirements, businesses might find it challenging to optimize their operations, which can contribute to moderating compensation packages.
In addition, the decline in unionization may also have an indirect effect on executive compensation, as unions traditionally play a major role in negotiating wages and benefits. With the decline of unions, there might be less upward pressure on wages overall, yet this is more speculative in the realm of executive compensation, which is often determined by boards and market pressures. However, it's clear that social pressures and economic downturns can also influence compensation levels, as firms seek to align their pay structures with the economic climate and social expectations.
Based on the options provided in the original question, efforts and compensation are also essential in determining pay structures. Rewarding people according to the effort expended and the costs incurred can sometimes conflict with external factors such as economic conditions or regulatory frameworks that limit compensation.