IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Executive Compensation and Firm Performance: Big Carrot, Small Stick

Listed author(s):
  • Wallsten, S.
Registered author(s):

    The statistical link between executive compensation and firm performance is well established. I explore two features of the relationship that have not yet been addressed empirically. First, does the relationship itself change depending on firm performance? I find that, on average, executives are rewarded in good years but are not punished in bad years. This result is consistent with a model that attempts to induce risk-taking behavior by rewarding good performance and limiting downside punishment. Second, does the relationship change with the executive's rank in the company? I find that the top executive's compensation is most strongly linked with performance, the second-highest ranking executive less so, and the third-highest even less. This result is consistent with linking compensation to performance only to the extent that the employee has some direct influence on it.

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Paper provided by United Nations World Employment Programme- in its series Papers with number 99-017.

    in new window

    Length: 16 pages
    Date of creation: 2000
    Handle: RePEc:fth:unwoem:99-017
    Contact details of provider: Postal:
    International Center for Economic Growth, 243 Kearny Street, San Francisco, California 94108.

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:fth:unwoem:99-017. 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: (Thomas Krichel)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.