Thursday, 23 May 2013

The performance pay shift continues...

From “Are Top Executives Paid Enough? An Evidence-Based Review” published in February: 

“Our review of the evidence found that the notion that higher pay leads to the selection of better executives is undermined by the prevalence of poor recruiting methods. Moreover, higher pay fails to promote better performance. Instead, it undermines executives’ intrinsic motivation, inhibits their learning, leads them to ignore other stakeholders, and discourages them from considering the long-term effects of their decisions on stakeholders. In particular, it is not possible to relate incentive payments to executives’ actions in an effective manner. Incentives also encourage unethical behaviour. Organizations would benefit from using validated methods to hire top executives, reduce compensation, eliminate incentive schemes, and strengthen stockholder governance related to the hiring and compensation of executives.”

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