The perceived impact of short term executive financial incentive schemes
Date
1994
Authors
Bussin, Mark Herbert Raymond
Journal Title
Journal ISSN
Volume Title
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Abstract
Organisations in South Africa are. paying out millions of Rands in financial
incentives to executives without ,knowing conclusively whether or not company
performance actually improves as a result of financial incentive schemes.
Unions, tne media, workers, politicians and others are paying increasing
attention to the levels of compensation that executives receive. The question
being asked is whether these levels ate really necessary.
This, the first research of its mud in South Africa, surveys the views of 121
top managers, from 17 organisations using incentive schemes, on the, impact
of these schemes. There is convincing evidence that they are perceived to
increase motivation and company performance, build teamwork and are
effective in aligning the interests of managers and shareholders. The schemes
are valuable in attracting, retaining and motivating executives" Given the
complexity of setting executive remuneration, it is submitted. that there be no
interference in the level of incentive scheme payouts.
The factor analysis yielded a four factor solution, which was interpreted in
terms of the literature review and constructs in the questionnaire. The first
factor revealed that incentives are a motivator and increase company
performance. The) build teamwork and are effective in aligning the interests
of managers and shareholders. The second factor state; that incentives should
be underpinned by openness and transparency. A fundamental principle behind
this is that the relevant financial position should be known by all participants.
It was also stated that the whole organisation i.e, all IfNels , should be on an
incentive scheme, The third factor highlighted risk aversion in these executives
and that basic salary is most important. The fourth factor, locus of control,
stressed the importance of the scheme to the individual personally in terms of
motivation, focus, reward, retention of services and the ability to control the
incentive scheme payout. 111e surprising finding was the extent to which SA
executives were risk averse and just how important the basic salary is.
Guidelines, based on the factor analysis, content analysis and oo:rrespohd~nce
analysis conducted on the questionnaires, ate offered to the designers
incentive· schemes. Without correctly designed and aggressive incentive
schemes the owners oforgamsations could expect very m.ediocre, "9 to S" type
of commitment from their top·management team.
Incentive schemes playa vital role in the design of com.petitive remuneration
systems. Their importance should not be underestimated.
Description
A research report submitted to the
Faculty of Management,
University of the Witwatersrand,
Johannesburg, in partial fulfilment
of the requirements for the degree
of Master of Management.
1994
Keywords
Citation
Bussin, Mark Herbert Raymond (1994) The perceived impact of short term executive financial incentive schemes, University of the Witwatersrand, <http://wiredspace.wits.ac.za/handle/10539/22044>