Abstract

Compensation incentive schemes are mainly driven by the need to align owner-manager interests in the real corporate world of separation of ownership and control. We find that the role of taxes and its implication for employees’ compensation is, at best, evidently inconclusive in the compensation-taxation literature. Using a literature review/synthesis of the existing research approach, we begin by identifying three distinct forms of employees’ compensation. Then, we examine developing and current state of extant research in order to review the role of taxation and its implication in the corporate choice, and magnitude of remuneration packages. In particular, we highlight the units of investigation in those studies, contextualize their findings, identify gaps or areas that have not been accorded much research attention, and offer suggestions for future analysis and research in this area of taxation vis-à-vis compensation packages. 

Key words: Employees’ compensation, taxes, incentive alignment.