CEO incentive plans improvement in German public companies

Abstract

The goal of the research paper is to analyze and improve mechanism of CEO incentive plans development in German public companies by using appropriate game theoretical modeling. The tasks of the study are: select and improve a game theoretical model for optimal compensation contract design based on literature review; analyze CEO compensation value and composition in German public companies and analyze the influence of reputation on fixed and variable compensation; test the game theoretical model on case study base; formulate recommendations for CEO incentive plans development and improvement. The main result of the study is evidence for the importance of reputation as a non-monetary compensation factor and the applicability of a game theoretical model in German public companies on case study base. The tested mechanism introduced reputation as an important non-monetary factor that affects the manager’s efforts exerted. Additionally, the methodology can be used to evaluate incentive plan value and give recommendations on strategy amendments in German public companies.