Accounting Papers
Document Type
Journal Article
Date of this Version
11-2013
Publication Source
Interfaces
Volume
43
Issue
6
Start Page
580
Last Page
589
DOI
10.1287/inte.2013.0705
Abstract
Our review of the evidence found that the notion that higher pay leads to the selection of better executives is undermined by the prevalence of poor recruiting methods. Moreover, higher pay fails to promote better performance. Instead, it undermines the intrinsic motivation of executives, inhibits their learning, leads them to ignore other stakeholders, and discourages them from considering the long-term effects of their decisions on stakeholders. Relating incentive payments to executives’ actions in an effective manner is not possible. Incentives also encourage unethical behavior. Organizations would benefit from using validated methods to hire top executives, reducing compensation, eliminating incentive plans, and strengthening stockholder governance related to the hiring and compensation of executives.
Keywords
bonus, cooperatives, corporate governance, democracy, employee selection, executive compensation, incentives, index methods, judgmental bootstrapping, Mondragon, motivation, pay, performance, stakeholders
Recommended Citation
Jacquart, P., & Armstrong, J. S. (2013). The Ombudsman: Are Top Executives Paid Enough? An Evidence-Based Review. Interfaces, 43 (6), 580-589. http://dx.doi.org/10.1287/inte.2013.0705
Date Posted: 27 November 2017