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The Relationship Between Risk, Incentive Pay, and Organizational Performance

Author
Bloom, Matthew C.; Milkovich, George T.
Abstract
In this study we extend agency based research by examining the role of risk in the structure of managerial compensation and its relationship to organization performance. Our results suggest that organizations facing higher risk do not place greater emphasis on short term incentives, they place less emphasis on it. Also, higher risk firms which rely on incentive pay exhibited poorer performance than high risk firms which de-emphasize incentive pay.
Date Issued
1997-09-01Subject
employee; management; theory; organization; performance; risk; pay; incentive
Type
preprint