Bonus Payments and Reference Point Violations
31 Pages Posted: 8 Mar 2010
We investigate how bonus payments affect satisfaction and performance of managers in a large, multinational company. We find that falling behind a naturally occurring reference point for bonus comparisons reduces satisfaction and subsequent performance. The effects tend to be mitigated if information about one's relative standing towards the reference point is withheld.
Keywords: reference points, incentives, bonus payments, job satisfaction, job performance
JEL Classification: D03, M52
Suggested Citation: Suggested Citation