Bonuses can often be depicted as additional and excessive compensation payments, particularly for senior management; however, a UK study investigated if bonuses generally act as a substitute for fixed compensation or as an addition to it. The study findings suggest that bonuses are typically a partial substitution of fixed compensation, with the extent of substitution being much larger in lower paid jobs.
Key Topics: Bonus; Variable pay; Pay for performance
The role of management bonuses in employee behavior is a little researched area but one that is potentially of great significance for companies. A study in Canada looked at the impact of management pay for performance bonus eligibility on the turnover levels of non-management employees. The results indicate that management bonus eligibility is indeed related to greater levels of voluntary non-management employee turnover, but is not related to greater involuntary turnover.
Key Topics: Pay for performance; Bonus eligibility; Employee turnover
Variable compensation plans are generally seen as one of the best ways of motivating salespeople. A US study examined the impact of various types of variable compensation system changes (VCSCs) on the job satisfaction and performance of salespeople. Focusing on the various VCSC dimensions, such as the size and frequency of changes, the researchers found that VCSCs do impact significantly on salespeople’s job satisfaction and performance, but the size of the impact can differ based on various environmental factors.
Key Topics: Variable compensation system; Sales compensation; Job satisfaction
With companies increasingly using pay-for-performance (PFP) plans to drive competitive advantage a study of the US travel industry examined the relative effects of three commonly used PFP plans (merit pay, individual bonuses, and long term incentives) on employee performance and employee turnover. The findings of the study indicate that, in an environment where all three types of PFP plans are operating simultaneously, merit pay has a greater effect on both performance and turnover than bonuses and long term incentives.
Key Topics: Pay for performance; Merit pay; Bonus; Long term incentives; Turnover
Acquisition related benefits paid to CEOs of targeted companies as part of takeover deals are relatively prevalent and as such a US study sought to examine the bonuses paid to CEOs of targeted companies during acquisitions to better understand the implications for shareholders. Primarily the researchers looked to determine if merger bonuses paid to target CEOs facilitate a wealth transfer from shareholders of the target company to those of the acquiring company. The results found this not to be the case, and that bidders fair worse in deals with such bonuses, despite the finding that they pay lower acquisition premiums.
Key Topics: Mergers and acquisitions; Merger bonus
Given the recent global financial crisis, many companies have placed more restrictions on variable compensation, however the implications of this for whistleblowing has received limited research attention. A recent US study examined the relationship between stock compensation structures and monetary whistleblowing rewards, and to what extent they influence senior managers’ decision to whistleblow. The results of this study suggest that when employees have stock compensation that has vesting restrictions, they are more likely to blow the whistle than when they have stock compensation that does not have vesting restrictions. Whistleblowing was also found to be more likely as the reward offered for whistleblowing increased.
Key Topics: Whistleblowing; Variable compensation; Equity |
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