Are long‐term incentive plans an effective and efficient way of motivating senior executives?

Are long‐term incentive plans an effective and efficient way of motivating senior executives? Research on senior executive reward has typically explored the connection between pay, performance and the alignment of interests of executives and shareholders. This article examines the relationship between reward and motivation, drawing on the psychological, behavioural economics and decision‐making literatures. Based on an empirical study of FTSE 350 senior executives, the research examines whether long‐term incentive plans are an effective and efficient way of motivating executives, taking into account risk, time discounting, uncertainty and fairness. The article concludes that the way executives frame choices, perceive value, assess probability, evaluate temporal effects and respond to uncertainty means that long‐term incentive plans (LTIPs) are generally not efficient and are often not effective in meeting their objectives. It proposes that, in its current form, agency theory does not provide a sound basis for modelling senior executive reward, and suggests five areas for development. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Human Resource Management Journal Wiley

Are long‐term incentive plans an effective and efficient way of motivating senior executives?

Loading next page...
 
/lp/wiley/are-long-term-incentive-plans-an-effective-and-efficient-way-of-CJiUDzS9RL
Publisher
Wiley
Copyright
Journal compilation © 2013 Blackwell Publishing Ltd
ISSN
0954-5395
eISSN
1748-8583
DOI
10.1111/j.1748-8583.2011.00188.x
Publisher site
See Article on Publisher Site

Abstract

Research on senior executive reward has typically explored the connection between pay, performance and the alignment of interests of executives and shareholders. This article examines the relationship between reward and motivation, drawing on the psychological, behavioural economics and decision‐making literatures. Based on an empirical study of FTSE 350 senior executives, the research examines whether long‐term incentive plans are an effective and efficient way of motivating executives, taking into account risk, time discounting, uncertainty and fairness. The article concludes that the way executives frame choices, perceive value, assess probability, evaluate temporal effects and respond to uncertainty means that long‐term incentive plans (LTIPs) are generally not efficient and are often not effective in meeting their objectives. It proposes that, in its current form, agency theory does not provide a sound basis for modelling senior executive reward, and suggests five areas for development.

Journal

Human Resource Management JournalWiley

Published: Jan 1, 2013

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off