Relative Bonus Compensation: The Role of Executive Rank and Non-Linearity

36 Pages Posted: 31 Jul 2005

Date Written: April, 2005

Abstract

The sensitivity of the rank of the change in bonus compensation to firm performance is compared between CEOs and non-CEOs. Executives are classified into four groups: 1) CEOs, 2) high ranking executives, 3) business unit managers, and 4) low ranking executives. There are no differences in bonus compensation between the four categories of executives when firm performance is moderate. However, when performance is very bad (good), CEO bonus compensation is significantly smaller (larger). Differences between CEOs and non-CEOs are limited to differences in intercepts related to the sign of performance and not slope coefficients on performance.

Keywords: Compensation, Non-CEO and Non-linearity

JEL Classification: J30

Suggested Citation

Reitenga, Austin L., Relative Bonus Compensation: The Role of Executive Rank and Non-Linearity (April, 2005). Available at SSRN: https://ssrn.com/abstract=772245 or http://dx.doi.org/10.2139/ssrn.772245

Austin L. Reitenga (Contact Author)

University of Alabama ( email )

Culverhouse College of Commerce
Box 870223
Tuscaloosa, AL 78249
United States
205-348-5780 (Phone)

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