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| Author: | Bender, R. |
| Title: | Why do companies use performance-related pay for their executive directors? |
| Journal: | Corporate governance
2004 : OCT, VOL. 12:4, p. 521-533 |
| Index terms: | Executives Pay Corporate governance Motivation Agency theory |
| Language: | eng |
| Abstract: | This paper presents the results of interview-based research to determine why companies use performance-related pay. The findings indicate that many companies adopt this structure despite a belief that the money does not motivate executives (henceforth as: execs.) Reasons related in part to best practice in human resource management: pay structures were designed to attract and retain execs. with the potential of large earnings, to focus their efforts in the direction agreed by the board, and to demonstrate fairness. Importantly, the variable pay was seen as a symbol of the director's success, both internally and to his or her peers in other companies. Finally, and significantly, an institutional theory explanation was given: companies used performance-related pay because their peers did, and because that legitimised them in the eyes of the establishment. |
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