Incentive Plans & Organization Performance

Prepared for : Dr. Mahfuzul Hoque Professor Department of Accounting & Information Systems Faculty of Business Studies University of Dhaka Bangladesh mhoque71@gmil.com

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Issues Covered
1 3 Incentive Plan & Organiztional Performance

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Monetary Compensation Plans Performance Relayed Pay System

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The Agency View of Incentive Schemes

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Incentive Plan & Organiztional Performance

Topics to be discussed by me
1 3 2 3 4 5 3 6 7 3 8
Incentive Plans & Organizational

Incentive – What is it? The most common types of Incentive Key Considerations in Desiging Incentives and Gainsharing Approachs Bases for Incentive System Executive Incentives How to Design an Effective Incentive Program Types of Incentive Programs Incentive Rewards & Incentive problems
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What is incentive?

An incentive is any factor (financial or non-financial) that provides a motive for a particular course of action, or counts as a reason for preferring one choice to the alternatives. Since human beings are purposeful creatures, the study of incentive structures is central to the study of all economic activity (both in terms of individual decision-making and in terms of cooperation and competition within a larger institutional structure). Eventually, incentives' aim is providing value for money and contributing to organizational success.

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Most common types of Incentives?
Incentives can be classified according to the different ways in which they motivate agents to take a particular course of action. One common and useful taxonomy divides incentives into three broad classes: 1. Remunerative incentives (or financial incentives) 2. Moral incentives 3. Coercive incentives - Personal Incentive - Social Incentive

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Incentive Issues
Besides providing greater flexibility in matching labour cots to organizationl success, incentive raises issues that should be considered before a particular approach is selected. Managers and HR specialists should understand the purpose, eligibility and coverage, payout standard, and administration of pay-for performance plans.
Issues
Purpose of nontraditional Compensation Eligibility Coverage Payout standard Administration

Key Considerations
Why is it under consideration? Who will be covered under this program? Where will it be applied? All facilities? What will trigger an incentive bonous? When will it be paid? How will the program be administered? By personnel? By line managers? Both?

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Bases for Incentive System
Incentive systems exist for almost every type of job from mannual labour to professionals, managerials, and executines work. The more common incentives syetaem are: 1. Piecework 2. Production Bonouses 3. Commissions 4. Maturity Curves 5. Merits Raises 6. Pay-for-Knoledge / Pay-for Skills Copmensation

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Executive Incentives
Executve copensation schemes can be in various forms. Incentives – especially executive incentives – need to achieve a balance between short-term results and long-term performance. Althrough incentives that relate to long term improvements were found in one study, most companies still tie executive bonouses to annual profits, which are considered short-term. Kaplan and Atkinson categorise executive compensation schemes, as follows: 1. Short Vs. Long Term 2. Cash Vs. Equity 3. Monetary Vs. Nonmonetary

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How to Design an Effective Incentive Program
In order to create an effective program, organizations must keep the overall objective in mind when considering program design and implementation. Objectives should be formed based on the organizations overall goals and should be straightforward and specific so participants clearly understand the expectations. Program objectives can vary depending on the needs of each individual organization. They should be challenging, yet achievable. If objectives are viewed as unattainable, the program will be destined for failure. Objectives may include motivating employees, recognizing performance, persuading customers to make a purchase, or even reinforcing a marketing message. Once the program goals have been determined, every aspect of the program must be measured against this goal in order to ensure the program's success in goal achievement. If successful, objectives should provide measurable results allowing the organization to track performance and measure the overall success of the program.

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Types of Incentive Programs
The major types of incentive programs are 1. Points Program 2. Employee Program 3. Consumer Program 4. Dealer/Channel Program 5. Sales Program

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Incentive Rewards
While there are many important factors to consider when creating an incentive program, selecting the appropriate rewards is vital to any programs success. The goal in choosing rewards is to select items that will spark the participant’s interest or feelings, and support the program’s objectives. Effective rewards will both motivate short-term behavior and provide motivation over time. While rewards come in a variety of shapes and sizes, here are some of the more common types: 1. Cash 2. Non-cash Rewards 3. Gift cards/certificates 4. Merchandise 5. Travel 6. Experiential 7. Non-monetary Rewards

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Incentive problems
Incentive structures, however, are notoriously more tricky than they might appear to people who set them up. Human beings are both finite and creative; that means that the people offering incentives are often unable to predict all of the ways that people will respond to them. Thus, imperfect knowledge and unintended consequences can often make incentives much more complex than the people offering them originally expected, and can lead either to unexpected windfalls or to disasters produced by unintentionally perverse incentives.

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Monetary Compensation Plans

Topics to be discussed by me
3 1 Forms of Monetary Compensation plan 2 3 4 3 5 Gain sharing-a bonus plan When does gain sharing work best ? Best way to implement Gain sharing

Improving Plant Performance Through Gain sharing

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Forms of Monetary Compensation Plan
Kaplan Atkinson (1989) discuss several forms of compensation plans.
• Cash bonus or profit sharing and the stock bonus: Cash or stock bonuses are awarded at the end of an accounting period. • Deferred bonus and compensation award: Cash or stock is deferred until a future period • Stock options: Employees have the right to purchase company stock at a future date, at a price established when the options were granted.
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Forms of Monetary Compensation Plan
• Performance shares or units: These are awarded in the form of company stock for achieving a specified, usually long-term, performance target. • Stock appreciation rights: Stock appreciation rights are deferred cash payments based on the increase of the stock price from the time award to the time of payment. • Phantom stock plans: These are awards in units of number of hares of stocks. • Participating units: These awards are similar to stock appreciation rights except that payment is keyed to operating results rather than stock price.

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Gain Sharing – A Bonus Plan

The literature has discussed another form of bonus plan, which is commonly known as gain sharing. Imberman(1995) illustrates gain sharing as follows: “Gain sharing is not an incentive or bonus plan for individuals exceeding a standard or quota. That’s the old piecework system. Gain sharing is group bonus plan. The entire factory workforce is involved is an effort to exceed past performance and achieve target gains. If successful, the gain is translated into cash shared. Usually the workforce receives 50% of the gain in bonuses, and the company receives an equal share in savings. That’s gain sharing in its simplest form.”

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Gain Sharing – A Bonus Plan
Imberman (1995) has discussed the following three sample gain sharing formulas: The Scanlon plan: This plan involves the ratio of payroll costs to sales, as expressed below:

Cost of work and non-work time paid + Pension + Insurance Sales dollars- returned goods + Inventory changes

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Gain Sharing – A Bonus Plan

The Rucker Plan: This plan involves the value added by manufacturing. It provides an incentive to save material and labor costs and it can be expressed as follows:

Costs of wages, benefits Sales dollar value of product- goods returned- supplies, services materials

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Gain Sharing – A Bonus Plan
Improshare plan: This measures only labour costs and uses time standards and past production records to set a production criterion. Its bonus formula is given below:

Standard value hours earned (current period)

Total actual hours worked (Base period) X Total standard value hours earned (Base period)

Total hours worked (Current period)

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Gain Sharing – When works best?
Works best when company performance levels can be easily quantified. Employee involvement significantly enhances the effectiveness of incentive pay. When used simultaneously, productivity gains from combining these techniques can exceed gains achieved separately.

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Gain Sharing – What is the best way to implement ?
Meet with executives to develop a clear understanding of Gain sharing. Develop various formulas and models to be used in predicting future gains and the costs associated with sharing those gains. Prepare rules, presentation materials, and dissemination of policy. Retrain supervisors and administrators. Teams of employees are selected by peers to develop costsaving measures. Through their personal knowledge about their jobs, employees are able to reduce waste and increase efficiency.

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Improving Plant Performance Through Gain sharing (Woodruff Imberman )
Gain sharing offers industry the opportunity to improve plant performance and boost productivity while reducing costs attributed to poor quality (e.g., waste, spoilage, rejects, and customer returns). Today, there are approximately 2,500 companies are using gain sharing, according to a study done by the American Management Association. Among the companies using the plan in their plant operations are such firms as Dresser Rand, Consolidated Diesel, Carter-Day, Dover Rotary Lift, Gradall Company, Ingersoll-Rand, Mixer Systems, Proen Products, Rexnord, Webster Electric, Cincinnati Milacron, and a host of smaller companies.
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Improving Plant Performance Through Gain sharing (Woodruff Imberman )
As an example of how gain sharing works, consider a company producing rigid and steering differential axles for tractors. From its records, the company determined that every $1,000,000 of good product output required 10,000 worker hours. Under gain sharing, the next $1,000,000 of axle output and shipment was produced with only 9,000 hours. If the average wage rate is $10 an hour, the 1,000 hours saved are worth $10,000. That is a gain to be shared equally between the workforce and company. In addition to helping reduce manufacturing costs, gain sharing can also enable a company to cut costs due to poor quality. For example, a company producing rolling bearings with solid lubricant cages had small labor costs (about 10 percent), but high poor-quality costs. An analysis of the company's records revealed that for every $1,000,000 in shipments, $200,000 was directly traceable to the cost of spoilage, rejects, and customer returns. By establishing a gain sharing program, the workforce was able to provide proper thermal hardening of the antifriction compound and provide equipment maintenance more promptly. The cost of poor quality was cut to $150,000 in the next $1,000,000 of shipments and the gain of $50,000 was shared between the workforce and the company.

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Performance Related Pay (PRP) System

Topics to be discussed by me
3 1 Performance Related Pay (PRP) – What is it?

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The most common types of PRP Steps in preparing PRP

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4 5 3 4

Why do employers introduce PRP? Factors need to considered in preparing PRP Safeguards against good PRP

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What is Performance Related Pay?

Performance Related Pay System links pay to a measure of individual, group or organizational performance. There is a wide variety of methods used, but all schemes assume that – “the promise of increased pay will provide an incentive to greater performance”

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Types of Performance Related Pay?
There are many different forms of performance related pay, which may be used on their own or side by side. Employers may move from one to another. Most common are: 1. Piecework 2. Payment by results 3. Plant or organization wide incentives 4. Merit pay 5. Performance related pay 6. Competence based pay 7. Profit related pay
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Types of Performance Related Pay?
1. Piecework: A price is paid for each unit of output; this is the oldest form of performance pay. 2. Payment by results: Bonus earnings depend on measured quantities or values of output for individuals or groups, usually based on work studied time units; this covers a wide range of bonus schemes. 3. Plant or organization wide incentives: Bonus earnings or pay levels are based on measured quantities or values for the whole establishment. 4. Merit pay: Bonus earnings or pay levels are usually based on a general assessment of an employee’s contributions to performance; this is an earlier, less structured form of the next system.
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Types of Performance Related Pay?
5. Performance related pay: Bonus earnings or pay levels are based on an assessment or appraisal of an employee’s (or team’s) performance against previously set objectives, usually part of a performance management system; this is a fairly recent development, particularly in the public sector, which has grown sharply in use since the 1980s. 6. Competence based pay: Reward and training are linked to competency frameworks, based on the worker demonstrating certain skills (eg. Problem solving, decision making, leadership, customer service, dealing with differing views) or achieving certain qualifications. 7. Profit related pay: Bonus or share options are based on the organization's profit performance; this is widespread in the private sector, where share options are often important for senior managers. Profit related pay has become less common since the government phased out tax Incentive Plans & Organizational 32 03/10/10 relief on PRP schemes.

Steps in preparing PRP
The key to all performance pay systems is the measurement required to determine the output on which to base payments. The main steps are: 1. Setting objectives 2. Appraisal results 3. Linking achievements to pay (and deciding where the money comes from).

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Why do employers introduce PRP?
1. To clarify objectives and engage employees with the organization's goals. 2. To motivate employees by linking pay to achievement of targets not length of service 3. To reward achievement and identify under performance; foster teamwork and fairness. 4. To contribute to overall improvements in productivity; 5. To introduce more flexible pay systems or deal with recruitment and retention problems. 6. In the case of some employers, to give greater power to managers and weaken trade union influence in bargaining and representation of staff.
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Factors need to be considered in preparing a good PRP?
The effectiveness of any pay system depends many factors. However, there are some problems inherent in all performance related pay schemes: 1. Staff motivation and moral –
A wide range of research has found schemes less effective than expected. In the public sector this is frequently due to cash limits making rewards for high performance ratings too small to motivate staff. Problems of poor training for managers and inadequate communication with staff have had a negative impact on staff morale.

2. Fairness
Because performance related pay systems are based on appraisal of the individual worker, often by their line manager, bias and personal favoritism can influence the result of pay reviews. Instead of motivating workers, performance pay can “undermine performance of both the individual and the organization by undermining team work, encouraging a short term focus and leading people to believe that pay is not related to performance, but to having the ‘right’ relationships and an ingratiating personality”. (Jeffrey P feffer, Harvard Business Review, May/June 1998)
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Factors need to be considered in preparing a good PRP?
3. Discrimination
Recent research found that performance based pay systems often discriminate against women because: the appraisal process is subject to gender bias and stereotypes; women’s skills are often undervalued by their managers (and by women themselves); women—especially those working part time -- have fewer opportunities for training, and managers are less likely to correctly assess women’s training needs. (M.T. Strebler, M. Thompson, P. Heron, Skills, Competencies and Gender; Issues for pay and training, IES Study 333, 1997). Performance pay may run counter to the development of objective, gender neutral job evaluation schemes which are being introduced to achieve equal pay for work of equal value. A study by the Institute of Personnel and Development, found that almost two-thirds of employers had no provision for monitoring sex and racial discrimination in their performance related pay systems.

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Safeguards considered in preparing a good PRP?
1. Negotiability on objective and design –
There should be trade union involvement from the start, with input on who should be included/excluded from the scheme; the relationship between employment and pay; how the scheme will operate, including joint monitoring and the appeals procedure.

2. Transparency –
The basis for appraisal and how rewards are arrived at should be transparent at both the individual and collective level.

3. Fairness in operation –
There should be a fair and equitable approach to the way the scheme is carried out for all staff. In competence pay schemes, all staff should have equal access to training.

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Safeguards considered in preparing a good PRP?
4. Piloting –
The scheme should be piloted to ensure that it achieves its objectives and does not operate unfairly.

5. Adequate appraisal –
Sufficient time should be available to managers to carry out any appraisals. The workload implications can be considerable, especially for a complex scheme.

6. Training –
Training should be available for all managers and staff.

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The Agency View of Incentive Schemes

Topics to be discussed by me
1 3 2 3 What is Agency Relationship Background Conflicts & Costs

4 Techniques 2 Resolve The conflicts 5 3 Different Incentive plans

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Agency

Agency Relationship
 Since majority of the world's work is done by person
acting as representative of another person, the ruling of agency is among the most fundamental.

 The agency describes an agreement between two
people where one will be a representative of another the principal and the agent. In other words, the principal is a person who wants to achieve something and he/she hires an agent to help him/her to achieve it. The agency relationship means, that both parties agree, that agent will represent the principal in doing business.
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Agency Relationship (cont)

 An agency relationship arises whenever one or two
individuals, called principal hire another individual or organization, called agent, to perform some services and delegate decision- making authority to that agent.

 The rights and responsibilities of the parties are
specified in a mutually agreed- upon contract. Both the agent and the principal are assumed to be rational economic persons motivated solely by selfinterest.
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Agency Relationship
Principal Contractual relation Agent

(cont)

In the context of a public corporation there are contractual relationships like: Contractual relation Agent

Shareholders Board of directors Executives

Board of directors Executives Subordinates

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BACKGROUND
 So far known agency theory came from Kenneth Arrow’s
theory of choice. According to the theory, there is a set of conceivable actions, which an individual could take each of which leads to certain consequences (Arrow 1974: 1). 1970s, but the concepts behind it have a long and varied history. Among the influences are Organization economics  Contract law  Political philosophy  The work of Locke and Hobbes. are those between,

 Agency theory in a formal sense originated in the early

 In financial management, the primary agency relationships
 Stockholders and managers  Managers and debt holders
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Types of Agency Relation
According to Kaplan and Atkinson (1989). There are two types of principal-agent relationships.

Agency Theory

First The firm’s owner or shareholders acting as the principal hire the chief executive officer to be their agent in managing the firm in their best interests.
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Second The firm’s top management groups acts as the principal and hires divisional managers as agents to manage the units or divisions.
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STOCKHOLDERS VS MANAGERS
A potential agency conflict arises whenever the manager of a firm owns less than 100 percent of the firm's common stock. If a firm is a sole proprietorship managed by the owner, the owner-manager will undertake actions to maximize his or her own welfare. The owner-manager will probably measure utility by personal wealth, but may trade off other considerations, such as leisure and perquisites, against personal wealth. If the owner-manager forgoes a portion of his or her ownership by selling some of the firm's stock to outside investors, a potential conflict of interest, called an agency conflict, arises.

Figure: Basic idea of Agency Theory (P: Principal, A: Agent) Source: Incentive Plans & Organizational http://en.wikipedia.org/wiki/Principal-agent_problem 47

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STOCKHOLDERS (through managers) VS CREDITORS
A SECOND AGENCY CONFLICT Creditors have the primary claim on part of the firm's earnings in the form of interest and principal payments on the debt as well as a claim on the firm's assets in the event of bankruptcy. The stockholders, however, maintain control of the operating decisions (through the firm's managers) that affect the firm's cash flows and their corresponding risks. Creditors lend capital to the firm at rates that are based on the risk ness of the firm's existing assets and on the firm's existing capital structure of debt and equity financing, as well as on expectations concerning changes in the risk ness of these two variables. The shareholders, acting through management, have an incentive to induce the firm to take on new projects that have a greater risk than was anticipated by the firm's creditors. On the other hand, shareholders may be reluctant to finance beneficial investment projects.
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Problems In Agency Relation
The agent is generally assumed to be a risk- averter and the principal to be a risk- seeker or risk averter. The agent might have a shorter duration with the organization than the principal

The problem in the agency relationship is that the agent and the principal may be at variance with each other.

The agent’s earnings are fixed (in the absence of incentive payments) while the principal is the residual claimant. The principal does not directly take part in management decision making and control (i.e., ownership is separated from management).

There is information asymmetry between the agent and the principal, in fact the principal is ignorant of many details of the agent’s activity.
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Agency Costs

 Agency costs are defined as those costs borne
by shareholders to encourage managers to maximize shareholder wealth rather than behave in their own self-interests.

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Agency Costs (Cont)
 Kaplan and Atkinson suggested that all individuals- principal
and agents care not only about financial compensation and wealth but also about perquisites of the job, such as attractive working conditions and flexibility in hours worked. If only a straight salary compensates the top executives of the firm, they may not be motivated to take actions that maximize the value of the firm to the shareholders.  Agency costs in the owner-manager relationship are the sum of:
 The costs of the incentive compensation plans (bonus, reward, etc.)  The costs of monitoring managers actions (audited financial statements)  The remaining costs of actions taken by managers that diverge from the preferences of the owners.
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Dealing with Conflicts
Conflicts may produce four distinct outcomes depending on the approaches taken by the people involved.
Win Win- Lose Lose-Lose Win- Win Lose-Win

Individ ual A’s outco me

Lose

Lose

Win

Individual B’s outcome

Figure: Four possible outcomes of conflict Source: “organizational behavior Human behavior at work”; Page: 258 Written by: Keith Davis, John W. Newstrom

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Dealing with Conflicts (cont)
Mutual interest:

Ethics Employee Goals Super Ordinate Goal of Mutual Interest Organization Goals Mutual Accomplishment of Goals Employee

Organization

Society

Figure: Mutual interest provides a super ordinate goal for employees, the organizations, and society.

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Dealing with Conflicts (cont)

 In addition to monitoring, the following
mechanisms encourage(!) managers to act in shareholders' interests:
       Performance-based incentive plans, Performance related pay (PRP ) Employment contract Long Term Incentive Plans Direct intervention by shareholders, The threat of firing, and The threat of takeover.

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Performance-based incentive plans
 Most publicly traded firms now employ performance shares, which
are shares of stock given to executives on the basis of performances as defined by financial measures such as earnings per share, return on assets, return on equity, and stock price changes. firm's managers earn more shares. If performance is below the target, however, they receive less than 100 percent of the shares. are designed to satisfy two objectives. enhance shareholder wealth.

 If corporate performance is above the performance targets, the

 Incentive-based compensation plans, such as performance shares,  First, they offer executives incentives to take actions that will  Second, these plans help companies attract and retain managers
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who have the confidence to risk their financial future on their own abilities—which should lead to better performance.

Performance related pay (PRP )

 To reduce the agency cost and to improve the
executive performance and for the best interest of the company or organization, we can show the following equation:  Salary Y= mx + c [international level follows it.]  Here y = total salary, mx = performance related compensation, c = constant base salary.

 But In Bangladesh, it follows the following
equation Y = c, that is only constant base salary.
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Employment contract

 Milgrom and Roberts (1992) identify four basic
principles of contract design:
    the Informativeness Principle, the Incentive-Intensity Principle, the Monitoring Intensity Principle, and the Equal Compensation Principle.

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A linear model

 The four principles can be summarised in terms

of the simplest (linear) model of incentive compensation:  w = a + b(e + x + g×y) [Source: Internet]  where w stands for the wage, e for (unobserved) effort, x for unobserved exogenous effects on outcomes, and y for observed exogenous effects; while g and a represent the weight given to y, and the base salary, respectively. The interpretation of b is as the intensity of incentives provided to the employee.  Exogenous Greek words "exo" and "gen", meaning "outside" and "production
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Long Term Incentive Plans and Managerial Decision- making

 One way to mitigate managerial risk aversion is
to provide the manager with long term incentive contracts that have a payoff structure that is a convex function of the firms’ stock price.

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Direct intervention by shareholders
 An increasing percentage of common stock in corporate America is
owned by institutional investors such as insurance companies, pension funds, and mutual funds. The institutional money managers have the clout, if they choose, to exert considerable influence over a firm's operations. Institutional investors can influence a firm's managers in two primary ways.

 First, they can meet with a firm's management and offer
suggestions regarding the firm's operations.

Second, institutional shareholders can sponsor a proposal to be voted on at the annual stockholders' meeting, even if the proposal is opposed by management. Although such shareholder-sponsored proposals are nonbinding and involve issues outside day-to-day operations, the results of these votes clearly influence management opinion.

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The threat of firing
 In the past, the likelihood of a large company's
management being ousted by its stockholders was so remote that it posed little threat. This was true because the ownership of most firms was so widely distributed, and management's control over the voting mechanism so strong, that it was almost impossible for dissident stockholders to obtain the necessary votes required to remove the managers.

 In recent years, however, the chief executive officers at
American Express Co., General Motors Corp., IBM, and Kmart have all resigned in the midst of institutional opposition and speculation that their departures were associated with their companies' poor operating performance.
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The threat of takeover:

 Hostile

takeovers, which occur when management does not wish to sell the firm, are most likely to develop when a firm's stock is undervalued relative to its potential because of inadequate management. In a hostile takeover, the senior managers of the acquired firm are typically dismissed, and those who are retained lose the independence they had prior to the acquisition. The threat of a hostile takeover disciplines managerial behavior and induces managers to attempt to maximize shareholder value.
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AGENCY AND ETHICS
 Since agency relationships are usually more complex
and ambiguous (in terms of what specifically the agent is required to do for the principal) than contractual relationships, agency carries with it special ethical issues and problems, concerning both agents and principals.  Ethicists point out that the classical version of agency theory assumes that agents (i.e., managers) should always act in principals' (owners') interests.  However, if taken literally, this entails a further assumption that either
 (a) the principals' interests are always morally acceptable ones or
 (b) managers should act unethically in order to fulfill their "contract" in the agency relationship.

 Clearly, these stances do not conform to any practicable
model of business ethics.
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AGENCY THEORY OVERVIEW
Key Idea Unit Of Analysis Human Assumptions Organizational Assumptions Information Assumption Contracting Problem Problem Domain Principal-agent relationships should reflect efficient organization of information and risk-bearing costs Contract between principal and agent 1. Self interest 2. Bounded rationality 3. Risk aversion 1. Partial goal conflict among participants 2. Efficiency as the effectiveness criterion 3. Information asymmetry between principal and agent Information as a purchasable commodity 1. Agency (moral hazard and adverse selection) 2. Risk sharing Relationships in which the principal and agent have partly differing goals and risk preferences (e.g. compensation, regulation, leadership, impression management, whistle blowing, vertical integration, transfer pricing)
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“It Is Not Important That How Good You Are… It’s Important… How Easily You Can Make Relation With Others….”

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Summary
 To improve organizational performance and effectiveness, business  
over the past few years have embarked upon various incentive schemes. We have shown that incentive plans provide motivation for organizational managers and executives. The principal-agent relationship theory suggests that organizational managers and top executives must compensated through financial compensation (salary, bonuses, etc) as well as non-financial compensation such as attractive working conditions, flexible hours, free holidays , and a car parking permit. Organization’s incentive plan depend on its particular circumstances within which it operates such as business size, strategic focus, economic conditions and external environment. Contemporary incentive schemes should be based on both financial and non financial performances. An effective incentive scheme provides strong motivation for the organizational managers and executives to achieve organizational goals.
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 

Incentive Plans & Organizational

Sample Question
 What is incentive plan?  What are the most common types of incentive plan?  What are the key Considerations in Desiging Incentives and Gainsharing          
Approachs? What are the bases for Incentive System? What is executive Incentives ? How can one design a incentive plan? What are the major types of incentive program? What is incentive rewards & what are the major problems in incentive plan? What are the forms of Compensation plans? What is Gain sharing? How does Gain sharing work? What is the best way to implement Gain sharing? How Plant performance be improved through?
68 03/10/10

Incentive Plans & Organizational

Sample Question
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What is performance related pay system? What are the most common types of performance related pay systems? What are the steps in preparing performance related pay system? Why do employer introduce performance related pay system? What are the factors that needs to consider in preparing performance related pay system? What are the that safeguards should be keep in mind in preparing performance related pay system? What are the sample Gain sharing Formulas? What is agency or agency theory? What are different types of agency relations? What are the costs and conflicts of agency? How corporations can resolve or minimize the conflicts? Is it possible to run the corporate world without agents? Why or why not? Write the positive and negative sides of agency relation.
69 03/10/10

Incentive Plans & Organizational