Importance of the management incentives for the improvement of company’s activities

Stevanovic Slavica and Simeunovic Ivana

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we have emphasized on the importance of the management incentives and their impact on company’s efficiency and effectiveness of corporate governance. Company owners, who regard managerial incentives as an investment rather than as a financial outlay, could expect a commitment of the managers to the interests of the company, achievement of desired results and business prosperity. At the same time, the potential conflict of interests between company’s shareholders and management could be solved by allocation of appropriate management incentives. As the effectiveness of management incentives depends on their good evaluation, it is important to identify potential indicators and to measure their consistency with the value created to business owners. Moreover we have identified financial measures for manager’s contribution to the company operations, used as a criterion for entitlement to managers’ incentives. Paper ends by assessing the need to adjust the company to changing global financial environment, with a special reference to the changes of incentives’ policy in Serbian companies, and the most important motivational factors affecting Romanian employees during the current period of global financial crisis.

Keywords: Management Incentives; Principal-Agent Problem; Incentive Schemes; Company Performance (search for similar items in EconPapers)
JEL-codes: J32 M12 M52 (search for similar items in EconPapers)
Date: 2011-10-17, Revised 2011-10-17
New Economics Papers: this item is included in nep-bec, nep-cta and nep-hrm
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