For chief executives and other senior leaders, it is not unusual for 60-80% of their pay to be tied to performance – whether performance is measured by quarterly earnings, stock prices, or something else. And yet from a review of the research on incentives and motivation, it is wholly unclear why such a large proportion of these executives’ compensation packages would need to be variable. First, the nature of their work is unsuited to performance-based pay. But moreover, as we will show, performance-based pay can actually have dangerous outcomes for companies that implement it.
Author: Dan Cable
Source: Harvard Business Review
Subjects: Corporate Governance, Human Resources