The significance of role definition and specificity on performance-based compensation: the case of accounting partnerships

Abstract

The objective of this research is to explore the impact of the failure of provision of clear and stable role definitions on performance-based compensation arrangements. A recent historical perspective on compensation agreements in CA partnerships revealed an unexpected instability, diversity, and a range in the roles undertaken by partners in CA firms. This report provides documentation of this instability, and suggests partnerships adopted performance- based compensation systems without consideration of the extent to which the success of such systems depended on stable role specificity. This research has implications for corporations where the interests of the entity may be best served when top management undertake diverse or previously unspecified roles and activities, on an ad-hoc or opportunistic basis.