Introduction: Do Compensation Policies Matter?

Abstract

Excerpt] The papers in this volume should give the reader a sense of the exciting empirical research that has recently taken place on compensation-related issues. As a set, these papers considerably expand our empirical evidence on the effects of compensation policies. Several papers show that executive compensation is structured in a way that at least implicitly ties executive compensation changes to measures of corporate performance, and —crucially—that doing so leads to improved corporate performance (Leonard, Murphy/ Gibbons, Abowd). Others show that compensation systems that pay workers for performance, in the sense of providing explicit or implicit incentives for high levels of performance, can motivate individuals to increase their effort levels (Ehrenberg/Bognanno, Hamermesh, Asch, Kahn/Sherer). Still others show that high-wage policies do have some of the effects that proponents of efficiency wage theories claim for them (Krueger/ Groshen, Holzer). Finally, one shows that profit-sharing plans appear, at least weakly, to increase employment stability (Chelius/Smith).