Eva Compensation Schemes and Controllability Issues: An Empirical Investigation

24 Pages Posted: 3 Aug 2006

See all articles by Jean Pierre Ponssard

Jean Pierre Ponssard

Ecole Polytechnique, Paris - Laboratoire d'Econometrie

Francois Larmande

HEC Paris - Accounting and Management Control Department

Date Written: October 2006

Abstract

This paper investigates the properties of EVAĆ¢ compensation schemes, which were considered as a major managerial innovation of the 90's. The analysis is carried on in the framework of contract theory and based on a six year longitudinal case study. It is argued that such schemes induce a loss of controllability (the bonus is influenced by factors out of the control of the managers) as compared to more traditional ones. The role of the target setting, based on external standards, and the absence of renegotiation are of particular significance in explaining this loss. This analysis may explain some of the difficulties encountered in the implementation of these schemes and their relative decline.

Keywords: Incentive schemes, controllability, external compensation standards

JEL Classification: D8, J33, M52

Suggested Citation

Ponssard, Jean Pierre and Larmande, Francois, Eva Compensation Schemes and Controllability Issues: An Empirical Investigation (October 2006). AAA 2007 Management Accounting Section (MAS) Meeting. Available at SSRN: https://ssrn.com/abstract=920994 or http://dx.doi.org/10.2139/ssrn.920994

Jean Pierre Ponssard (Contact Author)

Ecole Polytechnique, Paris - Laboratoire d'Econometrie ( email )

1 rue Descartes
Paris, 75005
France

Francois Larmande

HEC Paris - Accounting and Management Control Department ( email )

Jouy-en-Josas
France

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