Eva and the Controllability-Congruence Trade-Off: An Empirical Investigation

19 Pages Posted: 27 Sep 2004

See all articles by Jean-Pierre Ponssard

Jean-Pierre Ponssard

Ecole Polytechnique; University of Angers - French National Center for Scientific Research (CNRS); CESifo (Center for Economic Studies and Ifo Institute)

Francois Larmande

Ecole Polytechnique

Date Written: August 2004

Abstract

Incentives theory suggests that compensation schemes should be analyzed along two dimensions: controllability and congruence. Most schemes cannot satisfy both criteria at once. EVA bonus schemes, a major managerial innovation of the 90's, favor the congruence criterion. This paper questions its properties along the controllability dimension. The question is addressed through an in-depth case study: after three years in operation the actual bonuses paid by the system, as well as qualitative feedback from the managers involved, are analyzed. It is argued that EVA bonus schemes may have a major controllability problem.

Keywords: EVA management compensation, controllability-congruence trade-off, compensation standards

JEL Classification: D8, J33, M52

Suggested Citation

Ponssard, Jean-Pierre and Larmande, Francois, Eva and the Controllability-Congruence Trade-Off: An Empirical Investigation (August 2004). CESifo Working Paper Series No. 1257. Available at SSRN: https://ssrn.com/abstract=595365

Jean-Pierre Ponssard (Contact Author)

Ecole Polytechnique ( email )

1 rue Descartes
Paris, 75005
France

University of Angers - French National Center for Scientific Research (CNRS)

3, rue Michel-Ange
Paris cedex 16, 75794
France

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Francois Larmande

Ecole Polytechnique ( email )

B.P. 743
La Marsa, 2078
Tunisia

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