Bonus Payments, Hierarchy Levels, and Tenure : Theoretical Considerations and Empirical Evidence

We investigate two theoretical approaches that focus on bonuses as part of a firm's long-term wage policy. The first approach argues that explicit bonuses serve as substitutes for implicit career concerns. The second claims that bonuses act as complements to an executive's internal career. Our data show that throughout the whole chemical industry sector, bonus payments are mostly prevalent among the most senior executives and for management jobs rather than for jobs in research and development. The findings indicate that the two theoretical views are not mutually exclusive, but are both relevant in practice