Management Compensation Systems in Diversified Companies
2003 (English)In: EAA European Accounting Association,2003, 2003Conference paper (Refereed)
companies offer fundamentally different products. Within the same
company, different units may have different strategies and success
factors. Considerable differences in price sensitivity, target
customer groups and work methods may call for different management
compensation principles in order to implement the company-s
strategy appropriately. At the same time as the units may need
different management compensation systems for implementing the
unit-s strategy, the management compensation principles in
each unit need also be consistent with the company-s overall
Companies and units develop and change gradually through adaptation
to the environment. As different units require and attract
individuals with different characteristics, backgrounds and
education, different cultures tend to evolve in different units.
This paper analyzes whether differences in technology,
organizational structure and work assignment across units in
diversified companies motivate a differentiated management
The study is based on in-depth interviews with representatives from
different units in a multinational auditing firm. The company
embraces three fundamentally different lines of business, each of
which has fundamentally different success factors. Each
unit-s task assignments and way of using management
compensation to implement the strategies was mapped according to a
number of management accounting criteria.
The cultural diversification was found to be significant,
manifested in actors- fundamentally different views of and
attitudes towards the management compensation system, its use and
effects on performance.
A framework for analyzing the need for and design of a differented
management compensation system is proposed. If differences in
culture and technology are significant there will be a need for
differentiating some parts of the management compensation system.
Decisions in this matter should be balanced by taking the
company-s overall strategy into account. In the framework, a
number of essential issues that are found to be of importance in
management compensation decisions are proposed.
Place, publisher, year, edition, pages
performance measurement, management compensation, consultancy firms
IdentifiersURN: urn:nbn:se:liu:diva-31629Local ID: 17435OAI: oai:DiVA.org:liu-31629DiVA: diva2:252452