Published by:
Harvard Business Publishing
Length: 8 pages
Topics:
Executive compensation; Rates of return
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https://casecent.re/p/47580
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Abstract
Attacks on excessive managerial compensation are based more on emotion and anecdotal evidence than on careful research. A study of the compensation policies of 1,200 U.S. corporations from 1975 to 1984, supplemented by the findings of a 1984 University of Rochester symposium on managerial compensation, show the following results. As measured by the rate of return on common stock, a strong, positive statistical relationship exists between executive salary and bonus and company performance. Recent studies concluding otherwise look only at the level of executive compensation across companies at a particular time; it is more informative to study how compensation varies with companies'' performance over time.
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Abstract
Attacks on excessive managerial compensation are based more on emotion and anecdotal evidence than on careful research. A study of the compensation policies of 1,200 U.S. corporations from 1975 to 1984, supplemented by the findings of a 1984 University of Rochester symposium on managerial compensation, show the following results. As measured by the rate of return on common stock, a strong, positive statistical relationship exists between executive salary and bonus and company performance. Recent studies concluding otherwise look only at the level of executive compensation across companies at a particular time; it is more informative to study how compensation varies with companies'' performance over time.