Compensation Policy and Firm Performance: An analysis of the three largest software companies in the world

Abstract

Management Compensation is a phenomenon of strong debate, both in the academic world and within the companies themselves in the relation between management and investors. This work develops this theme through a general introduction starting with the study of the literature, also focusing on the strong controversy regarding CEO compensation. In the following part there is a contextualization of the theme of the management compensation in the software industry with the analysis of the compensation policies of three leading companies in this sector: SAP, Oracle and Microsoft. Considering the complexity of an appropriate design of the system and the many factors which influenced the settings, this project wants to analyse the compensation policies taking into account the differences regarding products, strategies, financial performance and corporate governance among the three firms. Using the disclosures coming from Integrated Reports, Proxy statements and Annual Reports, this work compares the situations in SAP, Oracle and Microsoft in order to understand their differences. It wants to try to analyse the discrepancies and understand if the policies are in line with the companies’ performance. Although the firms are consolidated companies, with continuous growth and leaders in the sector, the compensation policies are different in structure and therefore in the final remuneration. This leads to many considerations and discussion to which of the company applies the best policy.