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California Management Review
California Management Review is a premier academic management journal published at UC Berkeley
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Article Information
Management Incentive Compensation
Cassell, Frank H.
8
/
4
(
Summer
1966
):
11
-
20
Reassessment of incentive compensation for executives is underway in many companies across the country. There is a great uneasiness as to what the expenditure of millions of dollars annually for such compensation is really accomplishing. There is reason to believe that many of these expenditures are unproductive, that they no longer meet the conditions and needs of modern business, and that they often work at cross purposes. Often there is conflict between the avowed aims of the incentive compensation plan and the actual practices of management. This conflict seems to have come about because of a lag between actual changes which have occurred during the evolution from a nation of small enterprises to a country of large corporations, and the small businessman's realization of what has happened during this time. As business grows and becomes more complex, new layers of management and new functions are added. Increasingly, the owner-manager is removed from the full range of direct participation in the many activities of management. Accordingly, when the incentive pay plans are initiated, the goal has been to have the incentive pay of a single individual geared to his performance and as an addition to his base pay. In this sense, the incentive becomes the "added" part of compensation which recognizes and measures the worth of this individual's contribution to the company.
