On The Payment Structures For Preventing Short-termism Of Innovative Talents

This paper analyzes the theory of compensation structure optimization,it derives the compensation structure for preventing short-termism behaviors,and carries out parameter estimation with that computational simulation are enabled;Based on these,it further discusses the compensation structure optimization for innovative talents that are called for in three different kinds of innovations,such as the improvement innovation,the expansion innovation,and the transformative innovation.Drawing upon Thanassoulis,J 2013(Management Science)on the theory of compensation structure,this paper further deduces the optimization model of compensation structure for preventing short-termism.It proves that the upper limit of the effort cost of the innovative talents is not related to the outside option,and thus puts forward the hypothesis of lowest cost of compensation structure model,and the hypothesis of the maximal enterprise profit compensation structure model;By simulating these two models,it shows that the probability with high realized capability is insensitive to the salary structure;the success probability of the event,the short term added success probability by short-termism,and the probability of success at later stage of post short-termism decision are locally sensitive parameters,while the effort cost is a sensitive parameter for the compensation structure that prevents short-termism.Based on the analysis of sensitivity,parameters were estimated,and thus the compensation structure optimization through simulation is made possible.Numerical simulation shows the following.When innovative talents have lower probability of high realized ability,and higher probability of event success,if the effort cost is low,the fixed salary should be the major composition,else if the effort cost is larger,the fixed salary should then be reduced,and the salary structure is mainly composed of the immediate bonus and the deferred bonus.When innovative talents have high probability of high realized ability and low probability of event success,with the increase of effort cost,the salary structure varies ranging from fixed salary plus deferred bonus to mainly deferred bonus.The improvement innovative talents fit better with the fixed salary structure;the transformative type talents fit better with the deferred bonus structure,and the salary structure for adjacent innovative talents should be between the other two kinds of innovative talents’ salary structure.This thesis conducted a series of propositional derivation and built on the theory of compensation structure,then put forward a computational model for optimizing the salary structure that prevents short-termism.Based on sensitivity analysis,parameter estimation is then carried out.The compensation structures of the innovative talents required for the improvement type innovation,the expansion type innovation and the transformation type innovation were thereafter discussed.Therefore,this thesis contributes to the literatures of incentive compensation structure for innovation talents and enriches the theory of compensation structure optimization and the computational analysis of salary structure that prevents short-termism.