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

Schmalenbach Business Review, Vol. 64, April 2012, pp. 101-124

24 Pages Posted: 14 Apr 2012  

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

Date Written: April 1, 2012

Abstract

We investigate two theoretical approaches that focus on bonuses as part of a firm’s long-term wage policy. The first approach argues that explicit bonuses serve as substitutes for implicit career concerns. The second claims that bonuses act as complements to an executive’s internal career. Our data show that throughout the whole chemical industry sector, bonus payments are mostly prevalent among the most senior executives and for management jobs rather than for jobs in research and development. The findings indicate that the two theoretical views are not mutually exclusive, but are both relevant in practice.

Keywords: Bonuses, Career Concerns, Hierarchy Levels, Internal Careers, Tenure

JEL Classification: J31, J33, M51, M52

Suggested Citation

Grund, Christian and Kräkel, Matthias, Bonus Payments, Hierarchy Levels, and Tenure: Theoretical Considerations and Empirical Evidence (April 1, 2012). Schmalenbach Business Review, Vol. 64, April 2012, pp. 101-124. Available at SSRN: https://ssrn.com/abstract=2039226

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

Institute for the Study of Labor (IZA)

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

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)

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