EVA and the Controllability-congruence Trade-off: An Empirical Investigation
AbstractIncentives theory suggests that compensation schemes should be analyzed along two dimensions: controllability and congruence. Most schemes cannot satisfy both criteria at once. EVA bonus schemes, a major managerial innovation of the 90’s, favor the congruence criterion. This paper questions ist properties along the controllability dimension. The question is addressed through an in-depth case study: after three years in operation the actual bonuses paid by the system, as well as qualitative feedback from the managers involved, are analyzed. It is argued that EVA bonus schemes may have a major controllability problem.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1257.
Date of creation: 2004
Date of revision:
EVA management compensation; controllability-congruence trade-off; compensation standards;
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-09-12 (Accounting & Auditing)
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