Management Compensation and the Economic Crisis: Longitudinal Evidence from the German Chemical Sector

Christian Grund and Tanja Walter (tanja.walter@rwth-aachen.de)
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Tanja Walter: RWTH Aachen University

No 7435, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Making use of unique balanced panel data for the German chemical sector from the years 2008 to 2011, we explore the extent to which managers' compensation was affected by the economic crisis and the extent to which it increased afterwards. Carrying out longitudinal analyses, we find that, on average, bonus payments (in contrast to fixed salaries) decrease considerably during the crisis. The economic upturn in 2011 then leads to an average increase in variable payments and total compensation to even above the pre-crisis level. Changes in bonus payments are negatively correlated over time. We find considerable differences across employees with respect to changes in bonus payments. Fixed salary changes are much more homogeneous over the period of crisis. We explore determinants of compensation changes and find that changes in compensation have a strong relationship with employees' age, firm size and hierarchical level. Our findings hint at the relevance of an incentive perspective. We also examine that certain parts of managers seem to have more power to influence their compensation than others. Inequality in managers' compensation decreased during the crisis.

Keywords: fixed salaries; economic crisis; bonus payments; management compensation (search for similar items in EconPapers)
JEL-codes: J33 M12 M52 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013-05
New Economics Papers: this item is included in nep-hrm
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Citations: View citations in EconPapers (2)

Published - published in: Review of Managerial Science, 2015, 9, 751-777

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