Abstract
Based on contingency and agency insights, this study examines the influence of ownership characteristics on performance measurement systems (PMSs) and outcome-based compensation systems driven by differences in organizational goals and objectives between state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs) in Vietnam. The influence of ownership characteristics on the design of PMSs received little attention from researchers so far. Moreover, the few studies that are available so far only examined the relationship between firm ownership characteristics and the presence and use of economic performance indicators and economic outcome-based compensation in firms. In this study, the scope of PMSs is broader, and sustainability indicators focusing on community programs, ethical behavior, and government regulation are included in addition to economic based indicators. Analyzing survey data with the use of partial least squares (PLS) structural equation modeling (SEM), we find that the higher the share of the government in an organization’s capital is, the significantly more governmental duty indicators and significantly fewer ethical indicators and economic indicators are included in the PMS and outcome-based compensation systems. The inclusion of community indicators is not associated with firm ownership characteristics. Meanwhile, non-SOEs include significantly more economic value indicators, but no societal measures, like ethical, community-oriented, and governmental duty indicators.
Highlights
Performance measurement systems (PMSs) are a vital part of an organization’s processes since they include “systems, rules, practices, values, and other activities”, which are meant to support decision-making, as well as direct staff’s behavior and decisions consistent with the objectives and strategies of the organization [1,2,3,4]
Based on contingency and agency insights, this study examines the influence of ownership characteristics on performance measurement systems (PMSs) and outcome-based compensation systems driven by differences in organizational goals and objectives between state-owned enterprises (SOEs) and non-state-owned enterprises in Vietnam
Analyzing survey data with the use of partial least squares (PLS) structural equation modeling (SEM), we find that the higher the share of the government in an organization’s capital is, the significantly more governmental duty indicators and significantly fewer ethical indicators and economic indicators are included in the PMS and outcome-based compensation systems
Summary
Performance measurement systems (PMSs) are a vital part of an organization’s processes since they include “systems, rules, practices, values, and other activities”, which are meant to support decision-making, as well as direct staff’s behavior and decisions consistent with the objectives and strategies of the organization [1,2,3,4]. In order to enforce the guidance of PMS, outcome-based compensation systems are often coupled to these PMSs by linking the same performance indicators included in the PMS to bonuses to be obtained by managers and employees. PMSs and outcome-based compensation systems are important mechanisms to run a company in alignment with the goals and objectives specified for a company. These mechanisms help to guide managers’ and employees’ behavior and motivate them to pursue these goals. Including indicators with respect to corporate social sustainability in PMSs and outcome-based compensation is a mechanism to instigate managers and employees to act in a sustainable way (i.e., ethical and community-oriented). It is useful to know whether these indicators are included in the PMSs and outcome-based reward systems of companies and whether or not this inclusion depends on the ownership characteristics of the company
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