2005 Volume 13 Issue 1-2 Pages 67-82
The purpose of this paper is to examine the relationship between performance appraisal and determinants of managerial compensation in Japanese firms. In this study the main stress falls on the group dynamism observed in the course of the introduction of performance-based incentive system to the firm. We analyzed the economic effect of compensation plan on firm performances or shareholders' returns. From the standpoint of performance-based incentive contracts, it is very important to consider stock option and corporate governance. It should be clear that the wage reform is mandatory in order to enhance firm performances. This result means that performance-based incentive system must not only be understood as wage system but also as an enhancing activity of morale or personnel development.
