Management Fashion Pay-for-Performance for CEOs
Schmalenbach Business Review, Vol. 61, pp. 119-149, April 2009
32 Pages Posted: 19 May 2009
Date Written: April 1, 2009
We show theoretically and empirically that Pay-for-Performance, like many management fashions, has not achieved its intended aim. Our research focuses on previous empirical studies that examine the relation between variable executive pay and firm performance on various different dates. Our results indicate that a variable CEO income contributes very little to the increase of the firm’s performance, and that CEO salary and firm performance are not linked. The example of Pay-for-Performance shows that in the long run, many management fashions do not solve the problems that they promise to solve.
Keywords: CEO Compensation, Corporate Governance, Crowding Out, Management Fashion, Pay-for-Performance
JEL Classification: G 35, O31, J41
Suggested Citation: Suggested Citation