"This study uses panel data describing about 6,500 employees in a large international company to study the incentive effects of performance related pay. The company uses two performance related remuneration mechanisms. One is an individual "surprise" bonus payment. The other is a more structured...

A large, mature and robust literature now provides a useful framework for designing and implementing pay for performance. Several excellent surveys of this research are available. The purpose of this chapter is not to provide yet another survey, but to use the lessons of the economic literature...

Drawing on psychological and economic perspectives, this paper models aspects of pay systems that dispose employees towards longer discretionary work hours than predicted by economically rational exchange alone. Three pay-system triggers and their respective paths to the undertaking of...

The multitask agency theory argues that incentive devices for the agent need to be viewed as a system to induce balanced allocation of effort among the tasks. This important insight has not been incorporated into the empirical study of CEO compensation. Since there can be several measures for...

Objective measures of employee performance are rarely available. Instead, firms rely on subjective judgments by supervisors. Subjectivity opens the door to favoritism, where evaluators act on personal preferences toward subordinates to favor some employees over others. Firms must balance the...

Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical test developed by Courty and Marschke (2008) to detect whether the widely used class of Residual Income based...

We contribute to the extensive literature on earnings management by examining the impact of earnings management behaviour on executive compensation conditioned on managerial ability. We find that managers with better abilities are associated with more accrual earnings management, less real...

Manuscript Type: EmpiricalResearch Issue: This study applies the statistical properties of Benford's Law to CEO pay. Benford's ‘Law' states that in an unbiased dataset, the first digit values are usually unequally allocated when considering the logical expectations of equal distribution. In...

This article analyzes taxpayer data to look at companies that exceed the section 162(m) executive compensation deduction limit. These findings raise serious questions about the management of compensation boards acting in the fiduciary interest of shareholders