Abstract

This paper examines the effects of fringe benefits in the compensation package on performance of the Korean firms. Theoretically, fringe benefits have two implications in relation to employees: they are effective instruments that provide incentives; at the same time, some fringe benefits, especially the power-related benefits, are often used for exploitation of self-interests. Using a six-year panel data of the Korean manufacturing firms, we do a regression analysis and identify the links between fringe benefits and performance of the Korean firms. Our results suggest that, in general, these types of compensations do not promote good performance of firms. The results also imply that perhaps some designs in pay for performance in Korea are not efficient.

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