Compensation is a discretionary concept whose determinants may not necessarily be the same in all organisations. This study reports on the extent to which a limited number of determinants of compensation, as identified in this study, namely job performance, external equity, job families, organisational tenure and employee skill, predict employee compensation in an organisation. A convenience sample was drawn from the target population in the Gauteng area. Three small and medium-sized organisations were included in the sample, which consisted of a state-owned organisation in the aviation sector, a parastatal company in the finance development sector, and a private company in the banking sector. A categorical multiple regression analysis was conducted. The findings of this study reflect a greater consistency in four of the six variables as strong predictors of employee compensation, namely employee skill, employee performance, job family and job grade. These factors are strongly related to employee compensation and are regarded as strong predictors of it. The other predictors, namely external equity and tenure, can be considered to be of marginal significance as predictors of employee compensation. However, the results also indicate that these predictors may be more significant in state-owned and parastatal companies, in comparison to private companies. In addition, the determinants of employee compensation may also depend on the type and size of the organisation.

Compensation is a discretionary concept whose determinants may not necessarily be the same in all organisations. This study reports on the extent to which a limited number of determinants of compensation, as identified in this study, namely job performance, external equity, job families, organisational tenure and employee skill, predict employee compensation in an organisation. A convenience sample was drawn from the target population in the Gauteng area. Three small and medium-sized organisations were included in the sample, which consisted of a state-owned organisation in the aviation sector, a parastatal company in the finance development sector, and a private company in the banking sector. A categorical multiple regression analysis was conducted. The findings of this study reflect a greater consistency in four of the six variables as strong predictors of employee compensation, namely employee skill, employee performance, job family and job grade. These factors are strongly related to employee compensation and are regarded as strong predictors of it. The other predictors, namely external equity and tenure, can be considered to be of marginal significance as predictors of employee compensation. However, the results also indicate that these predictors may be more significant in state-owned and parastatal companies, in comparison to private companies. In addition, the determinants of employee compensation may also depend on the type and size of the organisation.

This dissertation analyzes the contracting problem between a firm and the research employees in its R&D department. The dissertation consists of two chapters. The first chapter addresses a simplified problem in which the R&D unit has only one agent. The second chapter studies a scenario in which the R&D unit consists of a team. In the first chapter, I look at problem in which a principal hires an agent to do a multi-stage R&D project. The transition from one stage to the next is modeled by a Poisson-type process, whose arrival rate depends on the agents choice of effort. I assume that effort choice is binary and unobservable by the principal. To overcome the repeated moral-hazard problem, the principal offers the agent a long-term contract which specifies a flow of payments based on his observation of the outcome of the project. The optimal contract combines rewards and punishments: the payment to the agent decrease over time in case of failure and jumps up to a higher level after each success. I also show that the optimal contract can be implemented by using a risky security that has some of the features of the stocks of these firms, thereby providing a theoretical justification for the wide-spread use of stock-based compensation in firms that rely on R&D. In the second chapter, I look at a scenario in which the R&D unit consists of a team, which I assume, for simplicity, comprises two risk-averse agents. Now, the Poisson arrival rate is jointly determined by the actions of both agents with the action of each remaining unobservable by both the principal and the other agent. I assume that when success in a phase occurs the principal can identify the agent who was responsible for it. In this model, incentive compatibility means that each agent is willing to exert effort conditional on his coworker putting in effort, and thus exerting effort continuously is a Nash-equilibrium strategy played by the agents. In this multiagent problem, each agents payment depends not only on his own performance, but is affected by the other agents performance as well. Similar to the single-agent case, an agent is rewarded when he succeeds, and his payment decreases over time when both agents fail. Regarding how an agents payment relates to his coworkers performance, I find that the optimal incentive regime is a function of the way in which agents efforts interact with one another: relative-performance evaluation is used when their efforts are substitutes whereas joint-performance evaluation is used when their efforts are complements. This result sheds new light on the notion of optimal incentive regimes, an issue that has been widely discussed in multi-agent incentive problems.

The papers of stock-based employee compensation have increased dramatically in recent years, focusing attention on whether stock-based employee compensation can enhance employees¡¦ motivation or impact firm value. A number of recent papers have addressed conflicting evidence as to whether stock-based employee compensation enhance the performance of the firm. Some relatively new studies used use the Ohlson (1995,1999) and Feltham ¡® Ohlson (1999) models to investigate the market¡¦s perception of the economic effect of employee stock options on firm value(Aboody et al.2001; Bell et al., 2002). However, critics have questioned the validity of such studies (For a review of related studies, see Beaver 2002). In fact, stock-based employee compensation can influence firm value through improving performance of firm, and at the same time by diluting the shares of outstanding stocks, thus harms shareholder equity. This study was primarily designed to examine how stock-based employee compensation affects shareholder equity through Incentive and dilute effects. Stock-based employee compensation in this study comprises employee stock bonuses and employee stock options. First, the Incentive and dilute effects are combined in Ohlson model. The hypothesized relationships of constructs, observed variables and operational definitions are defined. The empirical work will be conducted by LISREL method to estimate the coefficients in the model. The estimated results will be dressed the following points. 1.Whether the stock-based employee compensation affects equity valuation. 2.Whether the stock-based employee compensation affects that the intrinsic value through improving abnormal earning? 3.Whether the stock-based employee compensation harms shareholder equity by diluting the shares of outstanding stocks? 4.Discuss employee stock bonuses and employee stock options respectively. In this study, we find the stock-based employee compensation is relevant to the equity value. Employee stock bonuses are relevant to shareholder equity and abnormal earning. In other words, employee stock bonuses have directly incentive effects. Otherwise, employee stock bonuses also have dilute effects. However, the dilute effects are smaller than the incentive effects. On the other hand, employee stock options aren¡¦t relevant to shareholder equity and abnormal earning. Otherwise, employee stock options don¡¦t have direct dilute effects in grant year.

This study examined the effect of a score card¬-based performance pay plan in a professional services firm. The plan was implemented in response to a decreasing trend in productivity and a desire for a formal incentive compensation plan. Performance of manager and senior manager accountants were analyzed across two departments over a five year period. A definitive account of the effects of the intervention is limited by the case-¬study design, but the data does suggest that the performance pay plans used did not adversely affect performances. Design limitations of the plan and future research are also discussed.