Summary
This technical note addresses the key issues involved in designing executive compensation systems in accordance with value-based management principles. It focuses on the use of Economic Value Added as a means of aligning managerial and shareholder agendas. The potential advantages of this approach are examined in detailed, as are the potential drawbacks and limitations.
Teaching objectives
The note is designed as a supplement to courses in corporate finance, financial management, organizational design, or any other course that addresses implementation of value-based management. It can also be used as a supplement to Groupe Schneider: Economic Value Added and the Measurement of Financial Performance by the same author.
Keywords
- Economic Value Added
- Management Compensation
- Value Creation
