THE IMPACT OF EMPLOYEE COMPENSATION ONORGANIZATIONAL PERFORMANCE: THE KOREAN CASE

Abstract

Despite the long history of research, the top managerial compensations have shown a conflict between theories and practices. We tested the impacts of performance-based compensations and power-based compensations on the organization performance. In particular, we tested our hypotheses under the setting of an emerging market, where the financial market is not well-developed and, therefore, the financial incentives for excellent managerial performance are limited. We have found that, in top manager group, performance-based compensations were insignificantly or weakly associated with organization performance. Instead, top managers' power-based compensations were positively associated with organization performance. In contrast, in mid- and low-level employee group, we have confirmed a hypothesis based on agency theory that performance-based compensation leads to a positive organization performance.