Relationships Among Risk, Incentive Pay, and Organizational Performance

A study extends agency-based research by examining the role of risk in the structure of managerial compensation and its relationship to organization performance. Results suggest that organizations facing higher risk do not place greater emphasis on short-term incentives than other organizations - ra...

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Bibliographic Details
Published in:Academy of Management journal 1998-06, Vol.41 (3), p.283-297
Main Authors: Bloom, Matt, Milkovich, George T
Format: Article
Language:English
Subjects:
Agency theory
Compensation
Executive compensation
Incentive plans
Incentives
Investigations
Organizational behavior
Risk
Risk aversion
Stock options
Stockholders
Studies
Wages & salaries
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Summary:A study extends agency-based research by examining the role of risk in the structure of managerial compensation and its relationship to organization performance. Results suggest that organizations facing higher risk do not place greater emphasis on short-term incentives than other organizations - rather, they place less emphasis on them. Also, higher-risk firms that relied on incentive pay exhibited poorer performance than higher-risk firms that did not emphasize incentive pay.
ISSN:0001-4273
0000-1427
1948-0989
DOI:10.5465/256908