This paper explores five interpretations of “pay for performance”, presents a practical way to measure pay for performance and shows the extent of pay for performance at S&P 1500 companies. The paper argues that pay for performance has three dimensions: the sensitivity of relative pay to...

This paper surveys the recent literature on CEO compensation. The rapid rise in CEO pay over the past 30 years has sparked an intense debate about the nature of the pay-setting process. Many view the high level of CEO compensation as the result of powerful managers setting their own pay. Others...

This paper surveys the recent literature on CEO compensation. The rapid rise in CEO pay over the past 30 years has sparked an intense debate about the nature of the pay-setting process. Many view the high level of CEO compensation as the result of powerful managers setting their own pay. Others...

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...

We study how help can be fostered by means of a team bonus in the presence of rank-order tournaments. In a simple model we combine elements of relative rewards and a team bonus and study their effect on effort, help and sabotage. Quite intuitively the theoretical analysis suggests that team...

Two alternative relative compensation schemes are compared with respect to total output that can be generated at a given sum of salaries. While the promotion regime guarantees that any salary increase is permanent, the premium system allows a reduction in the income of an agent to the base...

This paper analyzes empirically the relationship between pay and performance. Economic and psychological theories predict that the design and implementation of a performance measurement and compensation system affect the motivation of employees. Our survey results demonstrate a positive...