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Management Compensation Systems in Diversified Companies
Linköping University, Faculty of Arts and Sciences. Linköping University, Department of Management and Economics, Business Administration.
2003 (English)In: EAA European Accounting Association,2003, 2003Conference paper (Refereed)
Abstract [en]

Diversified 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 strategy. 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 compensation system. 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
Keyword [en]
performance measurement, management compensation, consultancy firms
National Category
Social Sciences
URN: urn:nbn:se:liu:diva-31629Local ID: 17435OAI: diva2:252452
Available from: 2009-10-09 Created: 2009-10-09

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Parment, Anders
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ReferencesLink to record
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