EVA and the Controllability-congruence Trade-off: An Empirical Investigation
Incentives 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.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John M. Abowd & David S. Kaplan, 1999.
"Executive Compensation: Six Questions that Need Answering,"
NBER Working Papers
7124, National Bureau of Economic Research, Inc.
- John M. Abowd & David S. Kaplan, 1999. "Executive Compensation: Six Questions That Need Answering," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 145-168, Fall.
- Wallace, James S., 1997. "Adopting residual income-based compensation plans: Do you get what you pay for?," Journal of Accounting and Economics, Elsevier, vol. 24(3), pages 275-300, December.
- Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
- Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
- Stephen Riceman & Steven Cahan & Mohan Lal, 2002. "Do managers perform better under EVA bonus schemes?," European Accounting Review, Taylor & Francis Journals, vol. 11(3), pages 537-572.
- Jerold L. Zimmerman, 1997. "Eva And Divisional Performance Measurement: Capturing Synergies And Other Issues," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(2), pages 98-109.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1257. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.