By the increasing rate of flexibility in management systems including compensation systems, it is necessary to study theoretically and understand the key variables on designation of flexible compensation systems.
Purpose – The purpose of this article is to study the ability of agency theory in explanation of compensation problems inrollving the cultural context and occupation features in Iranian Automotivie Induslry.
Design/methodology- In this article, a conceptual model was developed in which we examined the relation of independent variable (agency theory assumptions) and dependent variables (current structure of compensation contracts and agent's tendency to arrange this structure). this relation is interfered with moderate variables (cultural dimensions and kind of occupation). In order to test the hypothesis, two active firms in automotive industry (manufacturing and service companies) were selected for sampling. It is to be mentioned that agency theory assumptions have not been examined in Iranian Automantive ludustry.
Results –Test of hypothesis confirmed lots of agency theory assumptions. our findings showed that some of agency theory predictions are attenuated by cultural characteristics and most of time there is a significant relation between agency theory assumptions and occupation conditions. Conclusions - using agency theory assumptions with respect to cultural dimensions and
occupation dimensions and occupation conditions in drawing up of compensation contracts will improve Iranian firm’s wage and salary systems in order to reduce agency problems and the related cost.