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Efficient management remuneration plan design: A consideration of specific human capital investments

Efficient management remuneration plan design: A consideration of specific human capital investments This paper investigates the contractual relationship between the manager and the firm. The results indicate that cross‐sectional variation in the components of management remuneration plans can be explained by variations in the specificity of both the manager's human capital investments and the firm's resources. Where the returns on the firm's resources are relatively more dependent upon (specific to) a particular manager, that manager is more likely to be able to negotiate his/her remuneration. The manager is also more likely to be paid on a long run contingent basis and to be offered deferred forfeitable remuneration. The results also indicate that the greater the firm‐specificity of a manager's human capital investments the greater the likelihood that the manager is offered termination compensation as part of the remuneration package. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting & Finance Wiley

Efficient management remuneration plan design: A consideration of specific human capital investments

Deegan, Craig
Accounting & Finance , Volume 37 (1) – May 1, 1997
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References (17)

Publisher
Wiley
Copyright
© 1997 Accounting and Finance Association of Australia and New Zealand
ISSN
0810-5391
eISSN
1467-629X
DOI
10.1111/j.1467-629X.1997.tb00312.x
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the contractual relationship between the manager and the firm. The results indicate that cross‐sectional variation in the components of management remuneration plans can be explained by variations in the specificity of both the manager's human capital investments and the firm's resources. Where the returns on the firm's resources are relatively more dependent upon (specific to) a particular manager, that manager is more likely to be able to negotiate his/her remuneration. The manager is also more likely to be paid on a long run contingent basis and to be offered deferred forfeitable remuneration. The results also indicate that the greater the firm‐specificity of a manager's human capital investments the greater the likelihood that the manager is offered termination compensation as part of the remuneration package.

Journal

Accounting & Finance – Wiley

Published: May 1, 1997

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