This up-to-date, research-oriented textbook focuses on the relationship between compensation systems and firm overall performance. In contrast to more traditional compensation texts, it provides a strategic perspective to compensation administration rather than a functional viewpoint. The text emphasizes the role of managerial pay, its importance, determinants, and impact on organizations. It analyzes recent topics in executive compensation, such as pay in high technology firms, managerial risk taking, rewards in family companies, and the link between compensation and social responsibility and ethical issues, among others. The authors provide a thorough and comprehensive review of the vast literatures relevant to compensation and revisit debates grounded in different theoretical perspectives. They provide insights from disciplines as diverse as management, economics, sociology, and psychology, and amplify previous discussions with the latest empirical findings on compensation, its dynamics, and its contribution to firm overall performance.
Preface; 1. Compensation as an Evolving Field: Past, Present, and Future; Origins in Industrial/Organizational Psychology; Practitioner Roots; Job Evaluation and Internal Pay Structures; Criticisms of Traditional Models; Philosophy of This Book; 2. Repertoire of Strategic Pay Choices; Criteria Used to Distribute Rewards; Assembling the Compensation Package; Administering the Compensation System; A Holistic Approach to Linking Compensation Choices and Business Strategy; Summary; 3. Pay Choices and Organizational Strategies as an Interrelated Set of Decisions; Internally Consistent Pay Strategies; Multilevel Organizational Strategies; Overarching Strategic Compensation Patterns and Corporate Strategy; Overarching Strategic Compensation Patterns and Business Unit Strategies; Theoretical Propositions; Policy Implications and a Research Agenda for the Future; Summary. Appendix 3.1. A Profile of Compensation Strategies Associated with Various Corporate Strategies; Appendix 3.2. A Profile of Compensation Strategies Associated with Various Business Unit Strategies; 4. Executive Compensation: Theoretical Foundations; Interdisciplinary Conceptual Roots; Marginal Productivity Theory; Governance Theories; The Behavioral Agency Model; Institutional Theory; Structural Theory; Human Capital Theory; Executive Pay as Symbolism; Pay Dispersion Theory; Self-selection Theory; Summary; 5. Determinants and Consequences of Executive Pay; Role of Executives in Influencing Firm Performance; Why the Evidence on Executive Pay Is So Mixed as We Approach Nine; Decades of Research; What We Know So Far about Executive Pay; Summary; 6. Policy Choices, Strategic Design of Executive Compensation Programs, and Implementation; Dilemmas Confronting Designers of Executive Pay Packages; Elements of the Executive Compensation Package and Strategic Implications; Summary; 7. Risk and Executive Pay; The Concepts of Risk; Theoretical Perspectives of Risk; Compensation and Risk Research; Summary; 8. Corporate Social Performance: An Alternative Criteria for the Design of Executive Compensation Programs; Social Criteria as Part of Executive Pay; Corporate Social Performance as an Alternative Approach; Issues in Rewarding Social Responsibility at Top; Summary; 9. Measuring Performance at Different Levels of the Organization; The Measurement of Performance: Preliminary Thoughts; Why Organizations Measure Performance; Performance Measurement Issues; The Conflicting Roles of Performance Measures; Performance Measures Specifications; The Choice of Performance Measures; Summary; 10. Managing Pay for Performance Systems; Why Performance Contingent Pay May Be Counterproductive; Navigating Treacherous "Pay for Performance" Waters; Rewarding Individual Performance; Rewarding Team Performance; Rewarding Organizational Performance; Efficiency-Based Pay Policies; Profit-Based Pay Policies; Multicriteria-based Pay Policies; Summary; References; Index; About the Authors.