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The dispersion of bonus payments within and between firms

Author

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  • Christian Grund

    (RWTH Aachen University)

  • Tanja Hofmann

    (RWTH Aachen University)

Abstract

We explore the dispersion of bonus payments of managers within and between five large firms from the German chemical sector and disentangle the dispersion within and between levels of the hierarchy. We use data from a yearly salary survey in these firms during the observation period 2008 to 2013. Bonus payments account for one quarter of yearly base salaries on average. Both the amount and the dispersion of bonus-to-base ratios differ across firms. We disentangle the dispersion between and within the levels of firms’ hierarchies. Revealed differences, which are consistent with differences in firms’ value statements, suggest that there is no one best incentive system of a firm.

Suggested Citation

  • 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.
  • Handle: RePEc:spr:jbecon:v:89:y:2019:i:4:d:10.1007_s11573-018-0920-x
    DOI: 10.1007/s11573-018-0920-x
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    More about this item

    Keywords

    Bonus payments; Bonus to base rate; Firm differences; Pay policies; Wage dispersion;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • 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

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