Employing Fairness

Abstract:     
This paper uses the example of performance-related or bonus pay in large firms to examine two competing orders of constraints on employers: legal restrictions and recommendations set out in management literature. Case law treats bonuses as compensation within a contract of exchange, viewing contract in a narrow, traditional way. In contrast, management literature views bonuses as communication with employees, and its prescriptions relating to pay system design, implementation, and operation reveal a notion of managerial fairness. The paper then inquires whether managerial fairness is derivative from the public law duty of procedural fairness. Differences between managerial and public law fairness (the former imposes more substantive constraints) suggest that, contrary to a mimesis hypothesis, firms, when adopting fair practices, are not replicating norms developed in the governmental context. Managerial fairness appears to be self-generating within the semi-autonomous social field of firms. Drawing on Teubner's work on autopoiesis, the paper then considers how the legal system can facilitate this self-regulation, while still retaining some ability to intervene.

Number of Pages in PDF File: 24

Keywords: employment relations. bonus pay, incentive pay, contract law, management literature, managerial fairness, administrative fairness, Teubner

JEL Classification: J30, J33, K31

Accepted Paper Series