Design issues in bonus contracts

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Design issues in bonus contracts

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dc.contributor.author Petersen, Christian en_US
dc.contributor.author Plenborg, Thomas en_US
dc.date.accessioned 2009-02-04T10:24:31Z
dc.date.available 2009-02-04T10:24:31Z
dc.date.issued 2007-12-11T00:00:00Z en_US
dc.identifier.uri http://hdl.handle.net/10398/6740
dc.description.abstract Bonus plans have become a popular tool for compensating managers and employees. While other accounting studies on bonus plans typically focus on earnings management, for example by examining the association between cash bonuses and stock returns or the incentive for management to manage earnings, our study discusses specific issues that are relevant in designing and understanding bonus plans based on financial performance measures. Bonus contracts should be designed so they align the interest of management and owners. In practice, this is far more difficult than it sounds. We discuss issues that require special attention in preparing bonus contracts: Choice of performance measure(s), accounting issues, link between performance and bonus, and bonus threshold. Our study should be of interest to managers, compensation committees, investors and others interested in bonus plans. A proper bonus plan is essential to ascertain that management compensation is closely linked to management’s ability to create value. en_US
dc.format.extent 11 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2007-05 en_US
dc.title Design issues in bonus contracts en_US
dc.type wp en_US
dc.accessionstatus modt07dec11 nijemo en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Regnskab og Revision en_US
dc.contributor.departmentshort RR en_US
dc.contributor.departmentuk Department of Accounting and Auditing en_US
dc.contributor.departmentukshort AA en_US
dc.idnumber x656555873 en_US
dc.publisher.city København en_US
dc.publisher.year 2007 en_US


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