The equity theory related to compensation is important to understand as you manage employee relations. Summarize the idea of the equity theory and discuss whether or not you agree with the theory. Support your stance with factual information. In conducting performance evaluations, most organizations also provide employees with an annual merit increase. This tends to lead to the belief that performance is directly linked to increases in compensation. Many organizations are trying to dismiss this belief by not providing merit increases as a part of the performance evaluations. Do you agree with this “strategic” human resources initiative?