Agency theory and variable pay compensation strategies

Linda K. Stroh, Jeanne M. Brett, Joseph P. Baumann, Anne H. Reilly

Research output: Contribution to journalArticlepeer-review

102 Scopus citations

Abstract

This study used a sample of middle-level managers to investigate the effects of organization-level agency-theory-based variables on the proportion of variable compensation that managers receive. Level of task programmability was associated with an increased use of variable pay, and long-term relationships between an agent and principal were associated with decreased use. Results supported the classical organizationtheory prediction that under higher risk, organizations use higher proportions of variable pay; but results question agency theory's ability to predict compensation strategy for middle-level managers in the high-risk situation.

Original languageEnglish (US)
Pages (from-to)751-767
Number of pages17
JournalAcademy of Management Journal
Volume39
Issue number3
DOIs
StatePublished - Jan 1 1996

ASJC Scopus subject areas

  • Business and International Management
  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation

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