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Redesigning Teams and Incentives:A Real Effort Experiment with Managers of a Merged Company

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Author Info

  • Claude Montmarquette

    (Université de Montréal - Département de Sciences Economique - Université de Montréal)

  • Jean-Louis Rullière

    ()
    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

  • Marie-Claire Villeval

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

  • Romain Zeiliger

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

Abstract

After a merger, company officials face the challenge to uniform compensation schemes and to redesign teams with managers originating from different incentives and working habits. In this paper, we offer a new way to investigate in post-merger the relationship between executive pay and performance, allowing to dissociate the respective influence of shifts occurring both in compensation incentives and in team composition. The results of a real effort experiment conducted with managers within a large pharmaceutical company show that not only changes in compensation incentives affect performance but also that both managers' past compensation schemes and company cultures matter for cooperation. The efficiency of a new compensation package is conditional on the reshuffling of teams and the past of incentives within the new teams.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00178471.

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Date of creation: Dec 2002
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Handle: RePEc:hal:journl:halshs-00178471

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Related research

Keywords: executive compensation; real effort experiments; team-based compensation;

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  1. Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA).
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  9. Dickinson, David L, 1999. "An Experimental Examination of Labor Supply and Work Intensities," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 638-70, October.
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  12. Benjamin E. Hermalin & Nancy E. Wallace, 1997. "Firm Performance and Executive Compensation in the Savings and Loan Industry," Finance 9710006, EconWPA.
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