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Bonus Payments, Hierarchy Levels, and Tenure: Theoretical Considerations and Empirical Evidence

Author

Listed:
  • Christian Grund
  • Matthias Kräkel

Abstract

We investigate two theoretical approaches that focus on bonuses as part of a firm’s long-term wage policy. The first approach argues that explicit bonuses serve as substitutes for implicit career concerns. The second claims that bonuses act as complements to an executive’s internal career. Our data show that throughout the whole chemical industry sector, bonus payments are mostly prevalent among the most senior executives and for management jobs rather than for jobs in research and development. The findings indicate that the two theoretical views are not mutually exclusive, but are both relevant in practice.

Suggested Citation

  • Christian Grund & Matthias Kräkel, 2012. "Bonus Payments, Hierarchy Levels, and Tenure: Theoretical Considerations and Empirical Evidence," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 64(2), pages 101-124, April.
    • Handle: RePEc:sbr:abstra:v:64:y:2012:i:2:p:101-124
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    Cited by:

    1. Christian Grund & Alexandra Soboll, 2025. "Monetary rewards and hierarchy level as drivers of employees’ self-evaluations," Review of Managerial Science, Springer, vol. 19(3), pages 729-756, March.
    2. repec:cgr:cgsser:03-12 is not listed on IDEAS
    3. Patrick Kampkötter & Kathrin Marggraf & Jan-Hendrik Zimmermann, 2017. "Determinants and effects of formal target agreements: an empirical investigation of German firms," Review of Managerial Science, Springer, vol. 11(1), pages 1-18, January.
    4. Christian Grund & Tanja Hofmann, 2019. "The dispersion of bonus payments within and between firms," Journal of Business Economics, Springer, vol. 89(4), pages 417-445, June.
    5. Kräkel, Matthias & Schöttner, Anja, 2012. "Internal labor markets and worker rents," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 491-509.
    6. Frederiksen, Anders & Lange, Fabian & Kriechel, Ben, 2017. "Subjective performance evaluations and employee careers," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 408-429.
    7. Tanja Hofmann & Johannes Martin, 2017. "Inter-firm Mobility and the Growth of Compensation Components," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 18(4), pages 399-423, October.
    8. K. Sommerfeld, 2013. "Higher and higher? Performance pay and wage inequality in Germany," Applied Economics, Taylor & Francis Journals, vol. 45(30), pages 4236-4247, October.

    More about this item

    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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