Linking Dynamic Equity Valuations to Optimum Weighting in the Performance Compensation System

Method of balanced scorecard (BSC) may well be one of the most popular strategy management and performance management systems, but BSC can only really success if it is appropriately linked to the employees' intrinsic and extrinsic incentives. In this research, two central issues include motivation and effect on long-term firm value comes into focus in the context of performance evaluation and compensation schemes - the central concern of this study. Yet, few studies have explored dynamic firm value evaluation and integrated it with optimal weighted in a performance compensation system in accordance with their forward-looking long-term firm value. This gap in the literature is striking - not only as it sits in stark contrast to the extensive studies on equity valuations, but also as interpretations for the effect of optimal weight for performance rewards on enhancing long-term firm value through increase existing motivation. It is important because the determined compensation relative weights of individual four perspectives influences the employees' incentive to work performance in the interest of the organization's strategic objective fulfillment.