Awarding Performance-Based Bonuses to Top Managers of Russian State-Owned Companies

• Main Authors: R. V. Gubarev, E. I. Dzyuba, F. S. Fayzullin
• Format: Article
• Language: Russian
• Published: Government of the Russian Federation, Financial University 2017-09-01
• Series: Управленческие науки
• Subjects: the russian oil economic sector; state-owned companies; corporate performance; managerial effectiveness; top managers; performance-based bonuses; system-based approach
• Online Access: https://managementscience.fa.ru/jour/article/view/117
• ISSN: 2304-022X; 2618-9941

Within the framework of the research, the hypothesis is proved that there is no direct strong correlation relationship between the level of awarding bonuses to top managers and corporate performance (as exemplified by the Russian oil branch). The lack of the corresponding methodology is the main reason of the chaotic bonuses awarding to company managers (the board). That is why within the framework of the research the task of elaborating a universal (for economic entities of the country’s oil branch) methodology of awarding performance-based bonuses to top managers of state- owned companies is put forward and solved. The issue-related methodology is elaborated and implemented in several successive stages: 1) the particular indicators system formation characterizing the corporate performance in an integrated fashion; 2) the normalization of such indicators values; 3) calculation of the integrating corporate efficiency indicator (quantitative evaluation); 4) qualitative evaluation of managerial effectiveness; 5) elaboration of a progressive scale: integrating corporate efficiency indicator - the level of awarding bonuses to the company top managers and 6) determination of the bonus level for the management (board) of the company. The particular indicators system formation is done on the basis of the American scientist D. Sink’s complex approach, who considers the company as a complex open social-economic system. In its turn a company is a sub-system within a higher-level system (in our case Russia oil branch). Presenting the national economic branch/a company from the perspective of a systemic approach makes it possible to abandon the procedure of eliminating external influence, i. e., to determine top managers’ “contribution” to operating performance of the economic entity properly. A progressive scale is the “core” of the methodology, which makes it possible not only to formalize the process of proper determination of the bonus level for the management (board), but to stimulate effective top management activity as well through connecting the bonus level to the corporate performance of the state-owned company. The elaboration of such a scale within the framework of the research is done through the Delphi method. With the view of higher objective evaluation of top managers’ contribution to ensuring corporate performance, a game-theory model can be used, enabling to transform the issue-related methodology from the single- to the double-layer one (to pass from the collective form of stimulation to the individual one).