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Agency Theory and the Motivational Effect of Management Compensation: An Experimental Contingency Study

Agency research has concluded that executive compensation through fixed salary promotes managerial opportunism, whereas equity ownership promotes managers' compliance with stockholders' interests. Using an experimental design, this study examined the extent to which these motivational effe...

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Bibliographic Details
Published in:Group & organization management 1992-09, Vol.17 (3), p.309-330
Main Authors: Kosnik, Rita D., Bettenhausen, Kenneth L.
Format: Article
Language:English
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Summary:Agency research has concluded that executive compensation through fixed salary promotes managerial opportunism, whereas equity ownership promotes managers' compliance with stockholders' interests. Using an experimental design, this study examined the extent to which these motivational effects of compensation are conditioned by the level of board control and conditions in the managerial labor market. Participants' opportunistic behavior was negatively affected by the level of board control. This effect was reinforced by high fixed salary compensation and favorable conditions in the managerial labor market.
ISSN:1059-6011
1552-3993
DOI:10.1177/1059601192173009