Posted by: brian | November 20, 2008

How much bonus is too much?

Do CEOs deserve outrageously large bonuses? Sometimes yes, often no. Some people argue that “competitive” (typically interpreted as “obscene” in practice) compensation packages are necessary to attract talented executives. But research seems to point out that small to medium sized bonuses lead to better performance. Is it possible that the highest-paid executives figure, “Hey, I’m getting at least 8 million bucks this year, who cares how I do the job”? (One thing I’d be curious to know is if, in their studies with different bonus levels, all participants knew how much of a bonus other groups were getting.)


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