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Article
Publication date: 3 May 2016

John Forth, Alex Bryson and Lucy Stokes

– The purpose of this paper is to investigate changes in the economic importance of performance-related-pay (PRP) in Britain through the 2000s using firm-level data.

Abstract

Purpose

The purpose of this paper is to investigate changes in the economic importance of performance-related-pay (PRP) in Britain through the 2000s using firm-level data.

Design/methodology/approach

The authors utilise nationally representative, monthly data on the total wage bill and employment of around 8,500 firms. Using these data, the authors decompose the share of the total economy-wide wage bill accounted for by bonuses into the shares of employment in the PRP and non-PRP sectors, the ratio of base pay between the two sectors, and the gearing of bonus payments to base pay within the PRP sector.

Findings

The growth in the economic importance of bonuses in Britain in the mid-2000s – and subsequent fluctuations since the onset of recession in 2008 – can be almost entirely explained by changes in the gearing of bonus to base pay within the PRP sector. There has been no substantial change in the percentage of employment accounted for by PRP firms; if anything it has fallen over time. Furthermore, movements in the gearing of bonuses to base pay in the economy are heavily influenced by changes in Finance: a sector which accounts for a large proportion of all bonus payments in Britain.

Research limitations/implications

The paper demonstrates the importance of understanding further how firms decide the size of bonus payments in a given period.

Originality/value

This is the first paper to present monthly firm-level data for Britain on the incidence and size of bonus payments in the 2000s.

Details

International Journal of Manpower, vol. 37 no. 2
Type: Research Article
ISSN: 0143-7720

Keywords

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Book part
Publication date: 16 July 2019

Ahmet C. Kurt and Nancy Chun Feng

Many argue that the design of compensation contracts for public company chief executive officers (CEOs) is often not guided by a goal of value maximization. Yet, there is…

Abstract

Many argue that the design of compensation contracts for public company chief executive officers (CEOs) is often not guided by a goal of value maximization. Yet, there is limited direct empirical evidence on the negative consequences of the proposed inefficient contracting between shareholders and CEOs. Using data on CEO bonus contracts of the S&P 500 firms, we investigate potential firm performance implications of the use of qualitative criteria such as leadership and mentoring in those contracts. We maintain that unlike quantitative criteria, qualitative criteria are difficult to define and measure on an objective basis, possibly resulting in an inefficient and biased incentive structure. Twenty-five percent of the sample observations have CEO bonus contracts that include a qualitative criterion for bonus payment determination. Our results show that employee productivity, asset productivity, capital expenditures, and future abnormal stock returns are lower for firms that use a qualitative criterion in CEO bonus contracts than those that do not. Further, contrary to the argument in prior literature that earnings management decreases with the use of subjective performance indicators in incentive contracts, we find that income-increasing accruals are actually higher when the CEO bonus contract includes a qualitative criterion. We recommend that compensation committees set concrete, measurable performance goals for CEOs, providing CEOs with better guidance and helping improve their corporate decision making.

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Article
Publication date: 16 July 2019

Benedikt Gerst and Christian Grund

Career interruptions of employees imply important issues for both firms and individuals, including a possibly lower compensation after returning to a job. Different…

Abstract

Purpose

Career interruptions of employees imply important issues for both firms and individuals, including a possibly lower compensation after returning to a job. Different compensation components are explored, as bonus payments frequently complement fixed salaries for many employees, making various channels of lower compensation possible. This paper aims to discuss this issue.

Design/methodology/approach

This study is based on a yearly salary survey among a rather homogeneous group of professionals and middle managers from the German chemical sector, which contains detailed information on compensation components next to individual and job characteristics. The incidence and duration of past career interruptions act as the most important independent variables. Mincer-type wage regressions are complemented by estimations on wage increases.

Findings

The results show that career interruptions are more related to lower subsequent bonus payments than they are to fixed salaries. Furthermore, interruptions caused by unemployment are associated with higher interruption pay gaps than those resulting from other reasons such as parental leave. The results even hint for catch-up effects following parental leave with regard to higher wage increases compared to individuals without interruptions. Career interruptions are more prevalent for female managers offering an explanation for a considerable part of gender pay gaps. Wage losses after career interruptions are more pronounced for male employees than they are for females, though.

Originality/value

This study extents the literature by disentangling the relation of career interruptions and different compensation components, bonus payments next to fixed salaries in particular. The role of interruption type and gender are also taken into account so that the paper deepens the understanding of the role of past career interruptions for employees’ remuneration.

Details

International Journal of Manpower, vol. 40 no. 5
Type: Research Article
ISSN: 0143-7720

Keywords

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Article
Publication date: 1 June 1975

ALAN WREN

Having an interest in behaviour and attitudes at work, I had ideas, when appointed to the company, of involving employees in its affairs. However, the setting‐up of a…

Abstract

Having an interest in behaviour and attitudes at work, I had ideas, when appointed to the company, of involving employees in its affairs. However, the setting‐up of a works council in so small an organisation, where all the employees are known to me, seemed somewhat artificial. Every employee who wanted it already had access to the managing director! The works council idea was shelved. About a year ago the question of a bonus scheme was raised by employees. Earlier attempts to introduce bonuses in the company had been abandoned as being too difficult or too costly to install or run. An examination of various possibilities showed that an added value bonus scheme could be appropriate and had the great advantage of being participative in style. Here was a basis for employee participation with a genuine purpose. What follows describes how the scheme evolved and its effects so far.

Details

Industrial and Commercial Training, vol. 7 no. 6
Type: Research Article
ISSN: 0019-7858

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Article
Publication date: 6 February 2009

Mike Mondello and Joel Maxcy

This paper aims to evaluate the effects of both salary dispersion and incentive pay on team performance using data complied from the National Football League over the…

Abstract

Purpose

This paper aims to evaluate the effects of both salary dispersion and incentive pay on team performance using data complied from the National Football League over the years 2000‐2007.

Design/methodology/approach

The authors consider the effect of pay structure on both in terms of on‐field and financial performance. Salary disparity and its subsequent consequences has been a topic of economic research on corporate pay structure and also professional team sport organizations. Analysis of pay structures incorporating the effects of incentive pay on performance is also recurrent in the literature. The paper uses regression analysis and incorporates both fixed and random effects models.

Findings

A relationship between improved on‐field performance and increased payroll, lower levels of salary dispersion, and increased incentive payments is found. However, when employing team revenue production as the measure of performance, a positive relationship with salary dispersion is found.

Research limitations/implications

The findings are of particular interest because a conflict of objectives is seen. When financial incentives are primary, hierarchical pay structure is optimal. It is shown that more compressed pay structures improve on‐field performance.

Practical implications

This study is unique in addressing how salary dispersion in combination with incentive pay correlates to team success as measured by both winning and revenue production. While the authors used the NFL as the organization of interest, this type of analysis could be applied to other professional sport leagues incorporating some type of salary cap. In addition, future research could also involve a mixed methods approach to help gain an additional understanding of the decision making of those in managerial positions of influence within sport and non‐sport organizations.

Originality/value

The study is unique in that most previous empirical work analyzing payroll structure in sport organizations does not consider disparity in conjunction alternative methods of improving performance through structure of compensation.

Details

Management Decision, vol. 47 no. 1
Type: Research Article
ISSN: 0025-1747

Keywords

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Article
Publication date: 1 December 1977

SO the miners have, by a pretty massive vote and against their leaders' advice and hopes, turned down an offer of extra payment tied to greater production. No form of…

Abstract

SO the miners have, by a pretty massive vote and against their leaders' advice and hopes, turned down an offer of extra payment tied to greater production. No form of incentive scheme whatever will be considered, they say.

Details

Work Study, vol. 26 no. 12
Type: Research Article
ISSN: 0043-8022

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Article
Publication date: 14 November 2016

Gabriel Wiskemann

The purpose of this paper is to examine the relation between individual performance and remuneration.

Abstract

Purpose

The purpose of this paper is to examine the relation between individual performance and remuneration.

Design/methodology/approach

The paper critically examines the importance of payment systems as a means of directly controlling employee behavior.

Findings

Abolishing performance ratings does not mean denying the importance of performance as the essential reference value. Instead, it is precisely the concept of ongoing dialogue through which the performance aspect comes to the fore.

Originality/value

The paper examines dialogue as basis for performance-based payment.

Details

Strategic HR Review, vol. 15 no. 6
Type: Research Article
ISSN: 1475-4398

Keywords

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Article
Publication date: 1 March 1981

THERE are signs that are only too welcome that the workers of the world, tired of or fearful of continual depression, are at last prepared to take positive steps towards…

Abstract

THERE are signs that are only too welcome that the workers of the world, tired of or fearful of continual depression, are at last prepared to take positive steps towards their solution.

Details

Work Study, vol. 30 no. 3
Type: Research Article
ISSN: 0043-8022

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Article
Publication date: 1 February 1978

THAT the United States should have taken speedy steps to bolster the dollar was to be expected. The fall was dramatic and laden with dire possibilities for American pride…

Abstract

THAT the United States should have taken speedy steps to bolster the dollar was to be expected. The fall was dramatic and laden with dire possibilities for American pride. That it would have helped considerably in their export field had perforce to take second place.

Details

Work Study, vol. 27 no. 2
Type: Research Article
ISSN: 0043-8022

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Book part
Publication date: 16 July 2019

Mahfuja Malik and Eunsup Daniel Shim

The purpose of this study is to conduct a comparative analysis of the economic determinants of the compensation for chief executive officers (CEOs) between the pre- and…

Abstract

The purpose of this study is to conduct a comparative analysis of the economic determinants of the compensation for chief executive officers (CEOs) between the pre- and post-financial crisis periods. To conduct the comparative analysis, the authors consider five years before and five years after the financial crisis of 2008. The authors use the data from the US financial service institutions and run separate regressions for the pre- and post-crisis periods to check if there is any significant difference in the economic determinants of executive compensation before and after the financial crisis. The authors find that total compensation and its incentive components decreased significantly in the post-crisis period. In the pre-crisis period, total compensation was determined by stock performance, accounting profit, growth, and leverage, whereas in the post-crisis period stock returns and leverage are the major factors influencing total compensation. The authors also find that firms’ leverage negatively influences the sensitivity of the pay for performance, but the influence of leverage on pay for performance is weaker in the post-crisis period. Our research is significant in the context of the US economy, the regulatory reforms of financial institutions, and the perspectives of the executive compensations. This is the first study that compares the relationship between compensation and firm performance over the pre- and post-crisis periods. It is an explicit attempt to develop a theoretical understanding of the compensation/performance relationship for the financial industry, which is blamed for the financial crisis and is affected by the Dodd–Frank regulation after the crisis.

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