Strategic Change, Multi-Task Managers and Executive Compensation

There is common consensus that executive compensation is strongly tied to firm size and much less so to financial performance. One suspects that observed strategic change in corporations may have an effect on these results. Based on multi-tasked theoretical considerations, our evidence for German industrial firms shows that pay for firm size elasticitivities decrease only for large firms as they change their strategy from growth to downsizing strategies. Furthermore pay for performance elasticities are contrary to predicitions of agency theory. Both results provide further support to the common belief that compensation contracts in public corporations seem imperfectly tied to firm performance and managers tasks