Incentive Schemes: Attraction, Retention and Motivation of Top Executives

Lotte Munk

Student thesis: Master thesis

Abstract

In organizational contexts the use of incentives is common and has been for decades. Common reasons for implementing incentives are to motivate employees and to control and align employee behavior. In economic theories the basic assumption is that the more money an employee earns the more motivated the employee will be. The focus on monetary elements in incentives schemes gives rise to speculation about what motivates very wealthy employees. This speculation arises mostly in regard to the highly paid and very wealthy top executives who do not seem to plan to retire any time soon, and to whom acquiring more money seems irrelevant. Do the monetary elements still act as the primary factor in regard to attracting, retaining and motivating wealthy top executives or do other non-monetary elements matter in this case? In the approach to attract, retain and motivate top executives, it seems that the rationale of the economic theories is applied when incentive schemes are designed. To supplement this approach, this study conducted a meta-theoretical analysis of three prominent economic theories and three prominent psychological motivation theories. The theoretical approach includes a review of the existing literature in regard to employee motivation and the motivation of top management. Theories and elements found in the literature were combined in a hermeneutic analysis of which incentives attract, retain and motivate wealthy top executives. The conclusion of the analysis is that monetary elements are important in attracting, retaining and motivating wealthy top executives, but they do not stand alone. In order to make sure the best candidates are attracted to a specific organization and wish to stay in it, other non-monetary elements must be included; specifically elements that facilitate intrinsic motivation through a sense of belonging and identification with the organization have a significant impact on retention and motivation. This finding has implications for the design of incentive schemes and the focus there seems to be on monetary elements. A supplement of non-monetary elements in the contract can help to make sure intrinsic motivation is facilitated, whereby agency cost can be reduced as a result.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2021
Number of pages86
SupervisorsCaspar Rose