Group versus individual compensation schemes for senior executives and firm performance
- Publication Type:
- Thesis
- Issue Date:
- 2009
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This thesis investigates the compensation of senior executives directly below the
CEO level. Specifically, it addresses two questions. First, the firm characteristics
associated with the choice of individual versus group compensation schemes for senior
executives (Chapter Two). Second, to provide evidence on the firm performance
consequences associated with the choice of individual versus group compensation
schemes for those executives (Chapter Three).
Based on a sample of 303 listed Australian firms for the period 2003 to 2005 (590
firm years), the key findings are: (I) individual compensation schemes are adopted by
firms where individual senior executive inputs and outputs are separable and
observable, and group compensation schemes are adopted where there are efficiencies
from senior executive co-operation and interdependencies between executives; (II) on
average there is no difference between the performance of these firms, regardless of
their compensation scheme choice; (III) firms that choose compensation schemes not
consistent with the firm’s characteristics suffer lower subsequent performance.
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