Executive Compensation and Performance Evaluation Practices
Summary
Executive compensation encompasses the structures and mechanisms by which senior executives are rewarded for their stewardship of an organisation. Traditional elements include fixed salaries, annual bonuses, long-term equity incentives and pension entitlements. Over the past decade, performance evaluation practices have diversified beyond pure financial metrics to embrace non-financial targets such as sustainability, diversity and customer satisfaction. Boards and remuneration committees design pay packages to align executive interests with those of shareholders and other stakeholders, while seeking to mitigate excessive risk-taking and opportunistic behaviour. Central considerations include the choice between absolute and relative performance measures, the calibration of incentive horizons, the manageability of targets and the degree of pay dispersion within the executive team. Globally, regulatory reforms and shareholder activism have intensified scrutiny of pay-for-performance linkages, prompting firms to disclose more granular information on pay design and outcomes. Practical applications of this research inform the governance of incentive schemes in listed companies, state-owned enterprises and financial institutions, and provide guidance on best practice in target setting, risk assessment and accountability mechanisms.
Research from Nature Portfolio
No recent Nature Portfolio content available.
Executive Compensation and Performance Evaluation Practices publication trend
The graph below shows the total number of articles in executive compensation and performance evaluation practices across all publications each year (not limited to Nature Index journals).
Technical terms
Relative performance evaluation: A compensation framework that compares executive performance to that of a peer group or industry average.
Absolute performance evaluation: A system that assesses executive outcomes against fixed, firm-specific targets irrespective of peer performance.
Pay dispersion: The variation in remuneration levels among executives within the same organisation.
Moral hazard: A situation in which one party takes on risk because the negative consequences will be borne by another party.
Systemic risk: The risk of collapse of an entire financial system or market, arising from interconnectedness and incentive structures.
References
- Task assignment and pay dispersion under moral hazard. Management Accounting Research (2024).
- Banks incentive pay, diversification and systemic risk. Journal of Banking & Finance (2024).
- Relative Versus Absolute Performance Evaluation and CEO Decision-Making. Journal of Financial and Quantitative Analysis (2022).
Turn complex research questions into confident strategic decisions
When you're under pressure to set direction, justify investment, or understand your competitive position, you need more than raw data — you need trusted insights you can act on.
Benchmark your performance against global peers using robust, methodologically sound analysis.
Combine quantitative metrics with qualitative expert insight to uncover strengths, gaps and emerging opportunities.
Gain tailored, decision-ready recommendations aligned to your strategic priorities.
Talk to us to learn more about our data dashboards and bespoke strategy reports.
Grow research skills, confidence and careers with training built for every stage of the research lifecycle.
Developed with Nature Portfolio journal Editors and internationally renowned experts. Discover three ways to learn:
Self-paced, online courses in convenient bite-sized units, covering key skills across scientific writing, publishing, grant writing, data analysis, and more.
Expert trainer-led workshops with hands-on exercises and real-time feedback across core research skills, delivered via interactive group sessions.
Editor-led workshops combining core principles in writing and publishing, personalised 1:1 feedback from Nature Portfolio Editors and hands-on exercises.
Explore course catalogues and workshop agendas, enquire about the options or request institutional pricing.