Compensation design may influence the extent to which managerial decision-makers take a long-term perspective in managing important resources like employees. I hypothesize that organizations relying more heavily on long-term compensation incentives exhibit greater stability in employment, perhaps because of a greater concern among management with long-term effectiveness. I also hypothesize that employment stability is more feasible when employees are covered by variable pay plans, which permit labor cost reductions without cuts in employment. Using multiple years of employment, financial performance, and managerial compensation data on 156 organizations, support is found for both hypotheses
