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Importance of the management incentives for the improvement of company’s activities

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  • Slavica, Stevanovic
  • Ivana, Simeunovic
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    Abstract

    In this paper we have emphasized on the importance of the management incentives and their impact on company’s efficiency and effectiveness of corporate governance. Company owners, who regard managerial incentives as an investment rather than as a financial outlay, could expect a commitment of the managers to the interests of the company, achievement of desired results and business prosperity. At the same time, the potential conflict of interests between company’s shareholders and management could be solved by allocation of appropriate management incentives. As the effectiveness of management incentives depends on their good evaluation, it is important to identify potential indicators and to measure their consistency with the value created to business owners. Moreover we have identified financial measures for manager’s contribution to the company operations, used as a criterion for entitlement to managers’ incentives. Paper ends by assessing the need to adjust the company to changing global financial environment, with a special reference to the changes of incentives’ policy in Serbian companies, and the most important motivational factors affecting Romanian employees during the current period of global financial crisis.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35364.

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    Date of creation: 17 Oct 2011
    Date of revision: 17 Oct 2011
    Handle: RePEc:pra:mprapa:35364

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    Keywords: Management Incentives; Principal-Agent Problem; Incentive Schemes; Company Performance;

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    1. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
    2. John M. Abowd & Michael Bognanno, 1995. "International Differences in Executive and Managerial Compensation," NBER Chapters, in: Differences and Changes in Wage Structures, pages 67-104 National Bureau of Economic Research, Inc.
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