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Author: Narayanan Subramanian Publisher: ISBN: Category : Languages : en Pages : 46
Book Description
We examine the relationship between the optimal incentive contract and the firm's decision to fire a manager for poor performance. We first derive some theoretical results using a simple principal-agent model, and then examine the empirical evidence on the incidence of forced turnover among CEOs with different compensation contracts. We find that CEOs with steeper compensation contracts (i.e., with greater incentives) are more likely to be fired following poor firm performance. Logit estimations indicate that among poorly performing firms, a CEO receiving incentives at the 60th percentile level are roughly 10% more likely to be fired than a CEO with incentives at the 40th percentile. The results are robust to various performance and incentive measures. We also find that the performance pressure was greater in the latter half (1997-99) of the sample than in the first (1993-96). Increased firing pressure might have been one of the factors contributing to the accounting shenanigans of the late 1990's.
Author: Narayanan Subramanian Publisher: ISBN: Category : Languages : en Pages : 46
Book Description
We examine the relationship between the optimal incentive contract and the firm's decision to fire a manager for poor performance. We first derive some theoretical results using a simple principal-agent model, and then examine the empirical evidence on the incidence of forced turnover among CEOs with different compensation contracts. We find that CEOs with steeper compensation contracts (i.e., with greater incentives) are more likely to be fired following poor firm performance. Logit estimations indicate that among poorly performing firms, a CEO receiving incentives at the 60th percentile level are roughly 10% more likely to be fired than a CEO with incentives at the 40th percentile. The results are robust to various performance and incentive measures. We also find that the performance pressure was greater in the latter half (1997-99) of the sample than in the first (1993-96). Increased firing pressure might have been one of the factors contributing to the accounting shenanigans of the late 1990's.
Author: Raj Aggarwal Publisher: ISBN: Category : Executives Languages : en Pages : 40
Book Description
Empirical research on executive compensation has focused almost exclusively on the incentives provided to chief executive officers. However, firms are run by teams of managers, and a theory of the firm should also explain the distribution of incentives and responsibilities for other members of the top management team. An extension of the standard principal-agent model to allow for multiple signals of effort predicts that executives who have other, more precise signals of their effort than firm performance will have compensation that is less sensitive to the overall performance of the firm. We test this prediction in a comprehensive panel dataset of executives at large corporations by comparing executives with explicit divisional responsibilities to those with broad oversight authority over the firm and to CEOs. Controlling for executive fixed effects and the level of compensation, we find that CEOs have pay-performance incentives that are $5.85 per thousand dollar increase in shareholder wealth higher than the pay-performance incentives of executives with divisional responsibility. Executives with oversight authority have pay-performance incentives that are $1.26 per thousand higher than those of executives with divisional responsibility. The aggregate pay-performance sensitivity of the top management team is quite substantial, at $30.24 per thousand dollar increase in shareholder wealth for the median firm in our sample. Our work sheds light on the alignment of responsibility and incentives within firms and suggests that the principal-agent model provides an appropriate characterization of the internal organization of the firm.
Author: Mark Vonrhein Publisher: iUniverse ISBN: 059550874X Category : Business & Economics Languages : en Pages : 78
Book Description
The costs of employee turnover can be staggering. Not only do they include fully-loaded payroll costs of a vacant position, but they can also rack up overtime and consume managers' time to recruit and train new hires. Add in lost productivity, and you have a major problem. Reducing employee turnover will clearly improve how your business functions and performs financially. In Turning Turnover Around, Mark Vonrhein synthesizes years of experience working with hundreds of entry-level employees. Vonrhein has successfully used a five-point plan-the Performance Compensation Program-to increase productivity, keep employees happy, and increase profitability. The Plan is straightforward. Start entry-level employees below industry average salaries, then clearly define performance goals and post performance results daily. Then, give feedback on a regular basis, and reward your high-performers with incremental, and typically more frequent, pay raises. To supplement his program, Vonrhein provides wage models that help you match an employee's pay level to his or her performance. He also shares a wealth of information on the program's impact, which ranges from more engaged and productive workers, to a healthier bottom line. Combine Vonrhein's program with his "management tune-up" tips and you'll soon see turnover turning around.
Author: Thomas J. McCoy Publisher: Amacom Books ISBN: 9780814450291 Category : Business & Economics Languages : en Pages : 260
Book Description
Forward-thinking companies are waking up to the fact that compensation is not merely a financial cost, but a powerful tool that can boost performance and profits at all levels of the organization. Linking psychology and pay is both an art and a science, and Compensation and Motivation is the first complete guide to this cutting-edge approach. For more than fifteen years, author Thomas J. McCoy has improved the performance of organizations through improving the performance of their employees. In these pages, he spells out the details of his innovative Behavior-Based Incentive Compensation system (BBIC). You'll learn why you should replace typical bonus and commission arrangements (which usually apply only to executives and sales personnel) with performance-oriented, self-funding plans that truly empower every employee. And, step by step, you'll learn how to identify your organization's needs; choose the best behavioral and compensation elements to address those needs; combine those elements into an incentive plan that will maximize performance and provide the best return for your compensation dollar and your management efforts; manage the sometimes difficult transition from fixed to variable compensation; balance the use of cash and noncash options; link incentive compensation with teamwork and quality improvements (such as Total Quality Management) for synergistic results; and measure your progress (using the Total Effectiveness Rating Model). GTE, Frito Lay, Xerox, Coming, and Vista Chemical are just a few of the corporations that have adopted the BBIC system as an attractive alternative to traditional compensation practices. This book includes candid accounts of their experiences--information and insights gleaned from McCoy's personal interviews--that will help you translate theory into practice as you design and implement your own new compensation plan. Compensation and Motivation shows how to apply the proven techniques of behaviorists such as Herzberg, Maslow, and Skinner without taking your eye off the bottom line. Use this pioneering yet practical handbook to make psychological and financial rewards work together at your company--perhaps for the first time.
Author: Richard N. Ericson Publisher: ISBN: 9781119204107 Category : Chief executive officers Languages : en Pages : 320
Book Description
Make the most of the new standards. Every year companies spend millions of dollars on executive incentives. All too often, however, these programs provide a very weak link between pay and performance, with executives potentially rewarded as much for bad decisions as they are for good ones. Packed with examples, The New Standards insightfully discusses:. How to link pay with business results that create long-term value;. Why incentive structures can discourage management from reasonable risk-taking, in some cases, and can enocourage imprudent risks in others;. The full range of inputs that shou.
Author: Mercer, LLC Publisher: Wiley ISBN: 0470478101 Category : Business & Economics Languages : en Pages : 256
Book Description
The numerous incentive approaches and combinations and their implications can be dizzying even to the compensation professional. Pay for Results provides a road map for developing and implementing executive incentives that drive business needs and strategy. It is filled with specific analytic tools, including tables, exhibits, forms, checklists. In addition, it uncovers myths in performance measurement strategy and design. Timely and thorough, this book expertly shows businesses how to drive their specific needs and strategy. Human resources and compensation officers will discover how to apply performance metrics that align with shareholder investment.
Author: Lucian A. Bebchuk Publisher: Harvard University Press ISBN: 9780674020634 Category : Business & Economics Languages : en Pages : 308
Book Description
The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Author: Julia Hur Publisher: ISBN: Category : Languages : en Pages : 45
Book Description
Employees today report being too busy to talk with their friends and family, even though the number of hours that employees work has remained relatively constant over the last five decades. To explain this paradox, we explore the role of incentive systems in shaping how employees think about and allocate time to their social relationships. Across 4 studies (n = 132,139), we examine how exposure to performance incentives shape employees’ social interactions. Results from one archival dataset, one panel survey, and two experiments show that when employees’ pay is contingent on performance, they prioritize spending time with work ties at the sacrifice of spending time with personal ties. We also document a mechanism for these results: employees who are rewarded for their performance perceive work ties as more instrumental. These results are strongest when performance incentives are based on peer evaluations and administered to employees (vs. managers). These findings provide the first empirical evidence incentives shape employees’ social interactions both within and outside of the workplace, potentially providing a novel explanation for the dissolution of familial and close ties in North America.
Author: Narayanan Subramanian
Author: Narayanan Subramanian
Author: Raj Aggarwal
Author: Mark Vonrhein
Author: Thomas J. McCoy
Author: Richard N. Ericson
Author: Harland Fox
Author: Mercer, LLC
Author: Lucian A. Bebchuk
Author: Manuel Buenahora
Author: Julia Hur