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Bonus Payments, Hierarchy Levels and Tenure: Theoretical Considerations and Empirical EvidenceChristian GrundRWTH Aachen University - School of Economics and Business Administration; Institute for the Study of Labor (IZA) Matthias KräkelUniversity of Bonn - Economic Science Area; Institute for the Study of Labor (IZA) IZA Discussion Paper No. 5284 Abstract: Using data on executive compensation for the German chemical industry, we investigate the relevance of two theoretical approaches that focus on bonuses as part of a long term wage policy of a firm. The first approach argues that explicit bonuses serve as substitutes for implicit career concerns. The second approach claims that bonuses are used as complements to an executive's internal career. Our data show that bonus payments are mostly prevalent among senior executives at higher hierarchy levels and rather for management jobs than for jobs in research and development. This is true for the whole chemical sector as well as for single large corporations. The findings indicate that the two theoretical views are not mutually exclusive, but are both relevant in practice.
Number of Pages in PDF File: 29 Keywords: bonus payments, chemical sector, hierarchy, tenure, wage policy JEL Classification: M52, J33 working papers seriesDate posted: November 1, 2010Suggested CitationContact Information
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