Management Compensation and the Economic Crisis: Longitudinal Evidence from the German Chemical Sector

35 Pages Posted: 22 Jun 2013

See all articles by Christian Grund

Christian Grund

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

Tanja Walter

RWTH Aachen University

Abstract

Making use of unique balanced panel data for the German chemical sector from the years 2008 to 2011, we explore the extent to which managers' compensation was affected by the economic crisis and the extent to which it increased afterwards. Carrying out longitudinal analyses, we find that, on average, bonus payments (in contrast to fixed salaries) decrease considerably during the crisis. The economic upturn in 2011 then leads to an average increase in variable payments and total compensation to even above the pre-crisis level. Changes in bonus payments are negatively correlated over time. We find considerable differences across employees with respect to changes in bonus payments. Fixed salary changes are much more homogeneous over the period of crisis.We explore determinants of compensation changes and find that changes in compensation have a strong relationship with employees' age, firm size and hierarchical level. Our findings hint at the relevance of an incentive perspective. We also examine that certain parts of managers seem to have more power to influence their compensation than others. Inequality in managers' compensation decreased during the crisis.

Keywords: bonus payments, economic crisis, fixed salaries, management compensation

JEL Classification: M52, M12, J33

Suggested Citation

Grund, Christian and Walter, Tanja, Management Compensation and the Economic Crisis: Longitudinal Evidence from the German Chemical Sector. IZA Discussion Paper No. 7435. Available at SSRN: https://ssrn.com/abstract=2283550

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

Tanja Walter

RWTH Aachen University ( email )

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
24
Abstract Views
379
PlumX Metrics