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Management Fashion Pay-for-Performance for CEOs

  • Pay-for-Ferformance
  • Published:
Schmalenbach Business Review Aims and scope

Abstract

We show theoretically and empirically that Pay-for-Performance, like many management fashions, has not achieved its intended aim. Our research focuses on previous empirical studies that examine the relation between variable executive pay and firm performance on various different dates. Our results indicate that a variable CEO income contributes very little to the increase of the firm’s performance, and that CEO salary and firm performance are not linked. The example of Pay-for-Performance shows that in the long run, many management fashions do not solve the problems that they promise to solve.

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Authors and Affiliations

  1. University of Zurich, IOU Institute for Organization and Administrative Science, Plattenstrasse 14, CH-8032, Zürich, Switzerland

    Katja Rost (Research Assistant)

  2. University of Zurich, IOU Institute for Organization and Administrative Science, and Research director, CREMA (Center for Research in Economics, Management and the Arts), Plattenstrasse 14, CH-8032, Zürich, Switzerland

    Margit Osterloh (Professor)

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  1. Katja Rost
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  2. Margit Osterloh
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Correspondence to Katja Rost.

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We would like to thank two anonym reviewers and Stephan Kaiser and Thomas Ehrmann for their valuable and helpful comments. Further, we are deeply indebted to Conrad Meyer from the University of Zurich.

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Rost, K., Osterloh, M. Management Fashion Pay-for-Performance for CEOs. Schmalenbach Bus Rev 61, 119–149 (2009). https://doi.org/10.1007/BF03396781

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