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The relationship between executive remuneration and corporate performance
Finance & Accounting
Pages 6 (1506 words)
The relationship between executive remuneration and corporate performance Table of Contents Introduction 3 Executive Compensation and Firm performance 3 Reference List 8 Introduction Traditional theories of a firm revolve around the concept that entrepreneurs are the owners or the managers of the firm.
At a normative level, the managers are expected to align their personal goals with that of the shareholders and aim toward maximising their values (Chaubey and Kulkarni, 1988). Many of the studies have identified that managerial compensation is linked with the firm’s performance, which is a critical factor in the maximization of shareholders value. The managerial compensation includes base salary, deferred compensation, perquisites and cash bonus. This paper deals with the literature review related to the relationship between compensation of the executives and the performance of the firm. Executive Compensation and Firm performance The advent of the “new economy” industries is a recent phenomenon and not much literature is available which concerns the relationship between performance and pay. Anderson, Banker and Ravindran (2000) have used simultaneous equation model for estimating the performance of the firm and compensation of the executives in the information technology industry and has found evidences that suggest that the share of both pay and bonus increases with the performance. Along with this, the study also suggested that the extent of incentive pay and the level of pay are responsible for positively affecting the performance of the firm. ...
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