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Abstract not found

We use a quasi-experimental research design to study the effect of giving workers feedback on their relative performance. The setting is a firm in which workers are paid piece rates and where, for exogenous reasons, management begins to reveal to workers their relative position in the distribution of pay and productivity. We find that merely providing this information leads to a large and long-lasting increase in productivity that is costless to the firm. Our findings are consistent with the interpretation that workers ’ incipient concerns about their relative standing are activated by information about how they are performing relative to others.

The study examines how 166 U.S. banks compensated their top management teams (top 4-5 executives in each bank) during 1993-1996. We observe two tiers of compensation in the executive suite: CEO and the rest. CEOs are paid more, especially in performance contingent compensation. The weight of base salary in CEO's pay is significantly lower than in other senior managers' pay, and CEO's pay performance elasticity is significantly higher. Beyond the CEO, top executives have a similar structure of compensation and similar pay performance elasticities. Our evidence is consistent with agency theory, and with several labor economics models. - 1. Introduction The paper presents evidence on how 166 U.S. banks compensated their top management teams (top four or five executives in each bank) during the 1993-96 period. The main goal is to extend previous studies on bank executive pay, e.g., Houston and James (1995), Hubbard and Palia (1995), and Crawford, Ezzel and Miles (1995), by examining n...

Much of the research on management compensation focuses on the level and structure of executives ’ pay. In this study, we examine a compensation element that has not received so far considerable research attention—the dispersion of compensation across managers—and its impact on firm performance. We examine the implications of two theoretical models dealing with pay dispersion—tournament vs. equity fairness. Tournament theory stipulates that a large pay dispersion provides strong incentives to highly qualified managers, leading to higher efforts and improved enterprise performance, while arguments for equity fairness suggest that greater pay dispersion increases envy and dysfunctional behaviour among team members, adversely affecting performance. Consistent with tournament theory, we find that firm performance, measured by either Tobin’s Q or stock performance, is positively associated with the dispersion of management compensation. We also document that the positive association between firm performance and pay dispersion is stronger in firms with high agency costs related to managerial discretion. Furthermore, effective corporate governance, especially high board independence, strengthens the positive association between firm performance and pay dispersion. Our findings thus add to the compensation literature a potentially important dimension: managerial pay dispersion.

We analyze the impact of interim ranking on the risk taking and performance behaviour of professional athletes participating in international weightlifting competitions. Weightlifting competitions are multistage tournaments with the unique characteristic that the athletes must announce in advance the amount they intend to lift at each stage, thus allowing quantification of the riskiness of their choices. We present two key findings. First, risk taking exhibits an inverted-U relationship with rank: risk taking increases up to rank six, but athletes then revert to safer strategies towards the bottom of the ranking. Second, athletes systematically underperform when ranked closer to the top, despite higher incentives to perform well. An athlete is more than 30 percent less likely to lift the announced weight when ranked first than tenth. Athletes also underperform in relatively more prestigious competitions, when the competition is more intense, and when the potential gain from a successful lift is higher. Taken together, these findings suggest that athletes may systematically “choke under pressure”.

NON-CEO EXECUTIVE PAY We develop a theory wherein the pay of non-CEO executives can be explained by micro-level opportunity structures-- the intersection of executives ' particular functional positions, CEO background, human capital, and the strategic resource allocation decisions made by the focal firm. Specifically, our framework suggests that executives will be paid more when they occupy positions made visible and important by the actions and resource allocation decisions arising from a firm's strategy, or have a functional background similar to that of the CEO. Moreover, we further suggest that executives ' human capital will benefit them most, in terms of pay, when their position helps the firm manage such strategic resource allocations. Support for this multilevel framework is provided using a unique, longitudinal data set that combines survey and archival data on the four highest echelons of senior executives in large U.S. firms. 2 Executive compensation is an integral component of corporate governance. Indeed, "few such topics on strategic leadership generate the same degree of controversy " (Finkelstein & Hambrick, 1996: 263). The tremendous attention paid to compensation often can be attributed to

We examine Tournament theory from the employer’s perspectives using the personnel records of a British firm in the finance sector. Since luck and effort are both relevant in the promotion process, thus when the importance of luck increases, workers ’ incentives to provide effort decreases. The model predicts that this loss in incentives can be remedied by increasing the size of awards to winners, meaning that the importance of luck and the size of award are positively correlated. This study examines this relationship and our results indicate that this relationship does exist. Interestingly, our results also suggest that some workers are risk-loving. Keywords:

Australia and Australian Research Council for funding the research upon which the analysis is

TMT COORDINATION NEEDS AND THE CEO PAY GAP: