Yes, Managers Should Be Paid Like Bureaucrats

By Bruno S. Frey, M. Osterloh. Social Science Research Network, 2005

283 citations recorded by the source corpus.

Corporate scandals, reflected in excessive management compensation and fraudulent accounts, cause great damage. Agency theory’s insistence to link the compensation of managers and directors as closely as possible to firm performance is a major reason for these scandals. They cannot be overcome by improving variable pay for performance as selfish extrinsic motivation is reinforced. Based on the common pool approach to the firm, institutions are proposed, serving to raise intrinsically motivated corporate virtue. More importance is to be attributed to fixed pay and strengthening the legitimacy of authorities by procedural fairness, relational contracts, and organizational citizenship behavior.

Subfields: Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/78e3349e5d0213271d1995484f0158f0542767f8

Citations in the corpus

Intrinsic motivation and extrinsic incentives jointly predict performance: a 40-year meta-analysis. (2014, unknown): “Furthermore, this distinction can explain the moderating role of incentives by invoking a “crowding out” hypothesis (cf. Frey & Osterloh, 2005; M. Gagné & Forest, 2008).3 On the one hand, when incentives are directly performance-salient, they possess two factors that are necessary for controlling…”
Organizational Control Systems and Pay-for-Performance in the Public Service (2013, unknown): “This is another important reason why pay-for-performance should be avoided for such positions (Frey & Osterloh, 2005; Moynihan, 2008; Tyler, 1999; Tyler & Blader, 2000).”
Relative Income Position and Performance: An Empirical Panel Analysis (2006, unknown): “According to Frey and Osterloh (2005), such schemes tend to reinforce selfish extrinsic motivation, crowding out intrinsic motivation.”
Corporate Governance: What Can We Learn from Public Governance? (2006, unknown): “Fixed incomes have the important advantage of serving as “redistribution constraints” (Hansmann, 1996; Osterloh & Rota, 2003; Frey & Osterloh 2005).”
How to Pay Nonfamily Managers in Large Family Firms: A Principal—Agent Model (2011, unknown): “These results suggest that it can be advantageous to offer a fixed-wage contract to a nonfamily executive (Frey and Osterloh, 2005) or to rely on subjective performance evaluations or voluntary bonus payments (Baker et al.”
Performance, incentives, and needs for autonomy, competence, and relatedness: a meta-analysis (2016, unknown): “A similar argument is at the foundation of the ‘‘crowding out’’ hypothesis (c.f., Frey and Osterloh 2005; Gagné and Forest 2008); when incentives are not tied to performance, they have no leverage over motivation, and thus cannot crowd out the naturally occurring desire to fulfill needs for…”
Bundles of Firm Corporate Governance Practices: A Fuzzy Set Analysis (2013, unknown): “…routine compliance with governance rules and regulations such as cash expenditures on recruitment and remuneration of executive and independent directors, over-allocation of stock options to managers (Frey & Osterloh, 2005), and costs of external disclosure systems, including external reporting.”