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Author: Merle Ederhof
Publisher: Now Publishers Inc
ISBN: 1601984545
Category : Business & Economics
Languages : en
Pages : 86
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Book Description
Discretion in Managerial Bonus Pools synthesizes and integrates a growing literature that has emerged over the past 10-15 years on the use of both objective and subjective performance indicators in managerial incentive plans. The authors examine the structure of efficient bonus pools (fixed payment schemes) in the presence of subjective performance indicators. The analysis covers a range of scenarios including single- and multi-agent settings, the interplay of objective and subjective indicators and short-term as opposed to long-term contracting relations. To synthesize the existing research, the authors frame their exposition around five recurring themes which collectively speak to the structure and the efficiency of incentive schemes based on subjective information i. Value of Subjective Performance Indicators. ii. Incremental Agency Cost. iii.Compression of Optimal Incentive Contracts. iv. Optimality of Proper Bonus Pools. v. Value of Multiperiod Contracting
Author: Merle Ederhof
Publisher: Now Publishers Inc
ISBN: 1601984545
Category : Business & Economics
Languages : en
Pages : 86
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Book Description
Discretion in Managerial Bonus Pools synthesizes and integrates a growing literature that has emerged over the past 10-15 years on the use of both objective and subjective performance indicators in managerial incentive plans. The authors examine the structure of efficient bonus pools (fixed payment schemes) in the presence of subjective performance indicators. The analysis covers a range of scenarios including single- and multi-agent settings, the interplay of objective and subjective indicators and short-term as opposed to long-term contracting relations. To synthesize the existing research, the authors frame their exposition around five recurring themes which collectively speak to the structure and the efficiency of incentive schemes based on subjective information i. Value of Subjective Performance Indicators. ii. Incremental Agency Cost. iii.Compression of Optimal Incentive Contracts. iv. Optimality of Proper Bonus Pools. v. Value of Multiperiod Contracting
Author: Florian Elsinger
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
This study experimentally investigates how the extent of superior discretion over the allocation of a bonus pool affects the output of a team when employees can engage in unproductive influence activities. Granting superiors high discretion allows them to use non-verifiable information and observations in order to mitigate free-rider incentives in teams. Prior research, however, also suggests that discretion may give rise to unproductive influence activities of employees. The question, therefore, is whether organizations should reduce superiors' discretion extent in order to mitigate influence activities in teams. Conventional economic theory assumes that superiors optimally account for influence activities in bonus decisions if they have incentives to do so. Reducing the discretion extent therefore harms superiors' flexibility and may impair the efficiency of discretionary bonus pools. Relying on behavioral theory, however, I argue that superiors likely overweight their personal information in bonus decisions. This increases incentives for employees to engage in influence activities under high discretion and detracts them from contributing to team output. I thus predict that reducing superiors' discretion extent actually increases team output. Furthermore, I predict and show that the degree of mutual monitoring between peers amplifies the positive effect of reducing superiors' discretion extent. The reason is that influence activities of peers are more salient under a high degree of monitoring and thereby affect behavior and fairness perceptions of employees more strongly. Reducing the discretion extent therefore becomes particularly important with higher degrees of mutual monitoring. This study contributes to the literature on discretionary bonus pools by providing evidence on the failure of superiors to sufficiently account for influence activities in bonus decisions and, thus, on the benefits of limiting superiors' discretion extent.
Author: Wendy J. Bailey
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
Research indicates that bonus plans can provide effective incentives when managers use discretion to incorporate non-contracted information into performance evaluations. The use of managerial discretion, however, draws concern about whether non-contracted information is used appropriately in performance evaluations (Baiman and Rajan 1995; Fisher et al. 2005). This paper provides experimental evidence regarding the decision processes through which managers apply discretion in allocating bonus pools. Additionally, we investigate whether the design of the bonus plan affects managers' bonus allocations. Our theory and evidence suggest that managers rely on an anchoring and adjustment heuristic to allocate bonus pools and that the bonus plan type (i.e., whether managers have full or partial discretion) influences managers' choice of anchor information. Regardless of anchor information, managers' subsequent adjustment is insufficient, resulting in a failure to fully incorporate non-contracted information. Even for those managers who do not rely on an anchoring and adjustment heuristic but instead attempt to perform comprehensive calculations, only those with full discretion fully incorporate non-contracted information.
Author: Victor S. Maas
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper investigates managerial discretion in compensation decisions in a team (i.e., joint production) setting. Specifically, we investigate the conditions under which managers tasked with allocating a discretionary bonus pool are willing to incur a personal cost to obtain ex post non-contractible information about the individual effort levels of of team members. Using theory from behavioral economics that incorporates preferences for fairness into the manager's utility function, we predict and demonstrate experimentally that managers' willingness to incur such a cost increases as the team's aggregate performance becomes less extreme (i.e., as the team's aggregate performance becomes a more noisy measure of individual performance). Further, using theory that incorporates preferences for trust reciprocity into the manager's utility function, we predict and demonstrate experimentally that managers' willingness to incur the cost will be greater for relatively high vs. relatively low levels of aggregate performance. The study contributes to the existing literature on subjective performance evaluation by identifying how social preferences influence managers' use of discretion in evaluation processes.
Author: Rebecca Hewett
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Perceptions of manager discretion in incentive allocation are theoretically and practically important to help explain the much-debated relationship between performance-related bonuses and intrinsic motivation. We argue, and demonstrate, that perceived managerial discretion is a key moderator to this relationship because of its relevance to procedural fairness. In a first study, we developed a measure for perceived manager discretion and distinguished it from related concepts. In a second experiment, we found that higher bonuses associated with higher levels of perceived manager discretion enhanced procedural fairness but those based on lower discretion did not. In a third field study, we found that actual bonuses implemented by a service organization enhanced intrinsic motivation indirectly through procedural fairness, but only when employees perceived their bonus to be based on higher levels of perceived manager discretion. Conversely, when bonus level was associated with lower perceived manager discretion, it negatively predicted of intrinsic motivation.
Author: Alnoor Bhimani
Publisher: Oxford University Press
ISBN: 0199283354
Category : Business & Economics
Languages : en
Pages : 464
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Book Description
Covering established and emerging areas in the fast changing field of management accounting, this work discusses accounting practices such as budgeting, costing, responsibility accounting and capital investment analysis.
Author: Dr Sandy Pepper
Publisher: Gower Publishing, Ltd.
ISBN: 1409458970
Category : Business & Economics
Languages : en
Pages : 112
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Book Description
Executive pay remains a contentious topic for many organizations. Unfortunately for company executives, much of the writing about it is either sensationalist or highly academic; none of it much help to the reader looking for a balanced and informed view of the subject. Sandy Pepper provides company executives, investors, and advisers with a summary of the main theories (from economics, game theory and the behavioural sciences) and best practices (in corporate governance, tax, accounting, compliance and so on) that relate to the compensation of senior executives. He also reviews the current state of corporate governance as it affects executive reward in Europe and the US. And he backs the text up with case study examples. Senior Executive Reward is an intelligent, practical and balanced explanation of the basis on which modern executives are compensated - and why. It is must-have reading for anyone who is interested in the complex and often controversial topic of executive pay, particularly remuneration committee members, professional advisers and senior executives anxious to understand for themselves (and explain to others) the basis on which they are rewarded.
Author: Theresa Libby
Publisher: Routledge
ISBN: 1317487990
Category : Business & Economics
Languages : en
Pages : 656
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Book Description
Behavioural research is well established in the social sciences, and has flourished in the field of accounting in recent decades. This far-reaching and reliable collection provides a definitive resource on current knowledge in this new approach, as well as providing a guide to the development and implementation of a Behavioural Accounting Research project. The Routledge Companion to Behavioural Accounting Research covers a full range of theoretical, methodological and statistical approaches relied upon by behavioural accounting researchers, giving the reader a good grounding in both theoretical perspectives and practical applications. The perspectives cover a range of countries and contexts, bringing in seminal chapters by an international selection of behavioural accounting scholars, including Robert Libby and William R. Kinney, Jr. This book is a vital introduction for Ph.D. students as well as a valuable resource for established behavioural accounting researchers.
Author: David Cabrelli
Publisher: Oxford University Press
ISBN: 0198748337
Category : Law
Languages : en
Pages : 969
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Book Description
A contextual, rigorous treatment of employment law, featuring a running case example to show exactly how the law works, and including extracts from key cases and source materials.
Author: David Otley and Kenneth Merchant Clive Emmanuel
Publisher: Springer
ISBN: 1489969527
Category : Business & Economics
Languages : en
Pages : 527
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Book Description
