The effect of management pay and incentives on long-term performance of public firms

It is well documented that the level of top management compensation has been increasing in both Norway and abroad for a number of years. Some studies emphasize that these pay raises are good for investors, whereas others draw the opposite conclusion. This research project seeks to develop new knowledge about how the (1) level of management pay and (2) the incentive structure, stock options etc., affect firms’ long-term performance. Furthermore, we also address how firms’ internationalization and their use of various corporate governance practices (such as board composition, board compensation etc.) affect managerial pay and firms’ long-term performance. With this study, we analyze how management pay and incentives might provide Norwegian firms with a comp etitive advantage. We suggest that this knowledge is needed to better formulate public policy on issues such as; tax, stock options, information disclosures etc., and firms’ choice of incentive and compensation schemes.