The Influence of Incentive Programs on Executives’ Risk Perception

Edson Lopes Cedraz Filho, Diogo Henrique Helal, Marcus Augusto Vasconcelos de Araújo, Flávio Rodrigo Leal Tunico

Abstract


The balance between executive compensation and value added is a constant challenge for organizations, as well as an important key to minimize agency problems. This study aims to evaluate the relationship between term of payment and compensation variability and the executives’ risk perception, as well as their motivation to add value, using the agency theory and the executive compensation literature as references for the study. Quantitative methods were applied, by collecting primary data from 121 Brazilian executives who answered a survey regarding their company’s compensation program models and their risk perception. Study results showed that executives' risk perception, as well as their motivation to add value, have statistically significant relationship with the level of compensation variability. Statistically significant relationship was also found between individual characteristics, such as age and time working for the organization, and the executive’s risk perception.


Keywords


Executive compensation; Agency theory; Risk perception; Corporate governance.

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DOI: https://doi.org/10.4013/base.2020.174.05



ISSN: 1984-8196 - Best viewed in Mozilla Firefox

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