High commitment management and payment systems

Article Abstract:

This paper extends the analysis of high commitment management (HCM) reported in a previous Journal of Management Studies article (Wood and Albanese, volume 32, number 2) by examining its linkage to payment systems. It opens with an overview of what the literature on HCM portrays as the pay systems that are most compatible with it. Then it reports research, based on data from a representative sample of manufacturing plants in the UK, which examines what pay systems in practice are used in conjunction with HCM. It also assesses whether, as we might expect, plants using piecework and individual bonuses are less likely to adopt such an approach. Finally, the paper examines whether changes in payments are made as managements attempt to heighten their use of HCM. Contrary to the claims of many writers, there is no systematic association between the use of HCM and the use of performance or contingent pay systems, such as merit pay and profit-sharing schemes. The study does, however, show that those plants in which merit pay is paid as a permanent increase in the basic wage are likely to have higher levels of HCM (and rate of change in it) than are those in which merit pay is simply paid as a bonus. Individual bonus systems appear to be associated with plants which are not pursuing high commitment management to any great extent. Finally, the research shows that for the period 1986 to 1990 payment system changes in British manufacturing, though highly varied, tended to be introduced in association with a greater use of HCM and not introduced as a substitute for this. Moreover, the research suggests that these were lagging other changes, rather than leading them. (Reprinted by permission of the publisher.)

Commitment (Psychology)

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Top management compensation and shareholder returns: unravelling different models of the relationship

Article Abstract:

In order to further examine the relationship between executive pay and company performance, this paper investigates the linkage between two separate components of executive compensation (i.e. cash compensation and stock options) and market return performance, among a selected sample of US pharmaceutical company CEOs and COOs. In the surveyed sample, changes in cash compensation were found to exhibit a between-firm relationship with lagged market returns, while delta stock option grants displayed a within-firm relationship. The former result suggests a commonality in practices across all firms, while the latter denotes idiosyncratic firm-specific practices. These contrasts represent different degrees of the agency problem in the contracts for cash compensation as compared to the stock option components. Levels of cash compensation were affected primarily by firm size. Market returns were not instrumental influences on the levels of both compensation components. (Reprinted by permission of the publisher.)

Stockholders, Employee stock ownership plans

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Executive reward systems: a cross-national comparison

Article Abstract:

This article examines executive compensation in the United States, France and the Netherlands. A brief review of executive compensation literature is conducted to expose its implicit value systems. Next, a qualitative study examines the interpretive schemas that executives express about the pay-performance relationship; US-developed expectancy theory and agency theory serve as a benchmark. The results indicate that US executives understand compensation in different terms from those employed by their European counterparts. (Reprinted by permission of the publisher.)

Netherlands, France, Corporations, Corporations, French, Corporations, Dutch

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