Bonus Payments, Hierarchy Levels and Tenure: Theoretical Considerations and Empirical Evidence

29 Pages Posted: 1 Nov 2010

See all articles by Christian Grund

Christian Grund

RWTH Aachen University - School of Economics and Business Administration; IZA Institute of Labor Economics

Matthias Kräkel

University of Bonn - Economic Science Area; Institute for the Study of Labor (IZA)

Multiple version iconThere are 2 versions of this paper

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.

Keywords: bonus payments, chemical sector, hierarchy, tenure, wage policy

JEL Classification: M52, J33

Suggested Citation

Grund, Christian and Kräkel, Matthias, Bonus Payments, Hierarchy Levels and Tenure: Theoretical Considerations and Empirical Evidence. IZA Discussion Paper No. 5284. Available at SSRN: https://ssrn.com/abstract=1700453

Christian Grund (Contact Author)

RWTH Aachen University - School of Economics and Business Administration ( email )

Aachen
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Matthias Kräkel

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
BWLII
D-53113 Bonn
Germany
+49 228 73 92 11 (Phone)
+49 228 73 92 10 (Fax)

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
47
Abstract Views
504
PlumX Metrics