研究報告書

Executive Salary as Prize of Tournament and Executive Bonus as Managerial Incentive Scheme in Japanese Firms

eng

48

1

49

1995-07-25

Version of Record

ln this paper hierarchical wage structures in promotion competition designed for work incentives and executive bonus designed for managerial incentives are analyzed together as a system of incentives in the internal labor market theoretically and empirically. It is found that ratio of male employees' number to directors' number, our proxy for the reverse of promotion probability has a strong effect on the differential between salary per director and average salary of male employees. ln contrast, average salary of male employees by firm is mainly dependent on market index for average salary of male employees. lt is also examined that generally the firm pays directors no bonuses if annual dividend per share is lower than 5 yen. Bonus per director depends mainly on pre-tax income per employees if it is paid. The above results are consistent with our story that salary and bonus to directors serve as prize of tournament and managerial incentive device respectively.

Working Paper