Importance of management incentives for the improvement of company's activities

Stevanović, Slavica and Simeunović, Ivana (2011) Importance of management incentives for the improvement of company's activities. In: The role of labour markets and human capital in the unstable environment. Karta Graphic Publishing House and Institute of Agricultural Economics, Ploiesti,ROM and Belgrade,SRB, pp. 115-136. ISBN 978-86-6269-001-2

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Abstract

In this paper we have emphasized on the importance of the management incentives and their impact on company’s efficiency and effectiveness of corporate governance. Company owners, who regard managerial incentives as an investment rather than as a financial outlay, could expect a commitment of the managers to the interests of the company, achievement of desired results and business prosperity. At the same time, the potential conflict of interests between company’s shareholders and management could be solved by allocation of appropriate management incentives. As the effectiveness of management incentives depends on their good evaluation, it is important to identify potential indicators and to measure their consistency with the value created to business owners. Moreover we have identified financial measures for manager’s contribution to the company operations, used as a criterion for entitlement to managers’ incentives. Paper ends by assessing the need to adjust the company to changing global financial environment, with a special reference to the changes of incentives’ policy in Serbian companies, and the most important motivational factors affecting Romanian employees during the current period of global financial crisis.

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