This paper explores conditions under which the ability to commit in a principal-agent relationship creates no additional benefit for the principal, over and above simultaneous interaction without commitment. A central assumption is that the principal’s payoff depends only on the payoff to the agent and her type.
{"title":"A Principal-Agent Relationship with No Advantage to Commitment","authors":"R. Vohra, F. Espinosa, Debraj Ray","doi":"10.2139/ssrn.3798785","DOIUrl":"https://doi.org/10.2139/ssrn.3798785","url":null,"abstract":"This paper explores conditions under which the ability to commit in a principal-agent relationship creates no additional benefit for the principal, over and above simultaneous interaction without commitment. A central assumption is that the principal’s payoff depends only on the payoff to the agent and her type.","PeriodicalId":105430,"journal":{"name":"ERN: Formal & Relational Contracts Between Employers & Employees (Topic)","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133140248","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Teamwork and team incentives are increasingly prevalent in modern organizations. Performance measures used to evaluate individuals' contributions to teamwork are often non-verifiable. We study a principal-multi-agent model of relational (self-enforcing) contracts in which the optimal contract resembles a bonus pool. It specifies a minimum joint bonus floor the principal is required to pay out to the agents, and gives the principal discretion to use non-verifiable performance measures to both increase the size of the pool and to allocate the pool to the agents. The joint bonus floor is useful because of its role in motivating the agents to mutually monitor each other by facilitating a strategic complementarity in their payoffs. In an extension section, we introduce a verifiable team performance measure that is a noisy version of the individual non-verifiable measures, and show that the verifiable measure is either ignored or used to create a conditional bonus floor.
{"title":"Team Incentives and Bonus Floors in Relational Contracts","authors":"Jonathan C. Glover, Hao Xue","doi":"10.2139/ssrn.3133218","DOIUrl":"https://doi.org/10.2139/ssrn.3133218","url":null,"abstract":"\u0000 Teamwork and team incentives are increasingly prevalent in modern organizations. Performance measures used to evaluate individuals' contributions to teamwork are often non-verifiable. We study a principal-multi-agent model of relational (self-enforcing) contracts in which the optimal contract resembles a bonus pool. It specifies a minimum joint bonus floor the principal is required to pay out to the agents, and gives the principal discretion to use non-verifiable performance measures to both increase the size of the pool and to allocate the pool to the agents. The joint bonus floor is useful because of its role in motivating the agents to mutually monitor each other by facilitating a strategic complementarity in their payoffs. In an extension section, we introduce a verifiable team performance measure that is a noisy version of the individual non-verifiable measures, and show that the verifiable measure is either ignored or used to create a conditional bonus floor.","PeriodicalId":105430,"journal":{"name":"ERN: Formal & Relational Contracts Between Employers & Employees (Topic)","volume":"16 1-2","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132757585","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper explores how existing relationships between competitors can shift them from self-focused, reward-maximizing pursuits to peer-focused, competitive pursuits. Building upon recent research on rivalry, we explore the consequences of this unique relationship for decision-making in situations of interdependence. Across three studies involving members of different countries, members of different universities, and coworkers, we found that decisions made by individuals paired with rivals differed significantly from the decisions of individuals paired with non-rivals. Of particular note, we observed that individuals paired with rivals were more willing to sacrifice their absolute outcomes in order to achieve relatively favorable outcomes vis-a-vis their rivals, and to trade off financial value for the opportunity to compete against and potentially defeat their rivals. Importantly, some of these effects of rivalry were eliminated by status affirmation, suggesting a potential intervention that can mitigate the detrimental consequences to rivalry. These findings contribute to literatures on rivalry, decision-making, and social value orientation, and suggest a number of important implications for employees and managers.
{"title":"To Win or to Profit: How Rivalry Affects Payoff Decisions in Interdependent Situations","authors":"Jeffrey P. Thomas, P. Schiaffino","doi":"10.2139/ssrn.3220639","DOIUrl":"https://doi.org/10.2139/ssrn.3220639","url":null,"abstract":"This paper explores how existing relationships between competitors can shift them from self-focused, reward-maximizing pursuits to peer-focused, competitive pursuits. Building upon recent research on rivalry, we explore the consequences of this unique relationship for decision-making in situations of interdependence. Across three studies involving members of different countries, members of different universities, and coworkers, we found that decisions made by individuals paired with rivals differed significantly from the decisions of individuals paired with non-rivals. Of particular note, we observed that individuals paired with rivals were more willing to sacrifice their absolute outcomes in order to achieve relatively favorable outcomes vis-a-vis their rivals, and to trade off financial value for the opportunity to compete against and potentially defeat their rivals. Importantly, some of these effects of rivalry were eliminated by status affirmation, suggesting a potential intervention that can mitigate the detrimental consequences to rivalry. These findings contribute to literatures on rivalry, decision-making, and social value orientation, and suggest a number of important implications for employees and managers.","PeriodicalId":105430,"journal":{"name":"ERN: Formal & Relational Contracts Between Employers & Employees (Topic)","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128468769","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Buried deep within the 2,232-page omnibus federal spending bill passed by Congress in March 2, was an obscure, half-page provision entitled the “Save America’s Pastime Act” (SAPA). The SAPA was inserted into the spending bill at the last minute at the behest of Major League Baseball (MLB), following several years—and several million dollars—worth of lobbying efforts. MLB pursued the legislation to insulate its minor-league pay practices from legal challenge after they had become the subject of a federal class-action lawsuit alleging that the league’s teams failed to pay minor-league players in accordance with the Fair Labor Standards Act’s (FLSA) minimum-wage and overtime provisions. The SAPA helps shield MLB from these claims by creating a new statutory exemption largely excluding most professional baseball players from the protections of the FLSA. This article provides the first substantive analysis of the SAPA. Specifically, it asserts that although initial assessments concluded that the provision would shield MLB from any future liability for its minor-league pay practices, a closer reading of the statute reveals that it contains several potential ambiguities that could arguably give rise to unanticipated liability for the league. Nevertheless, the article asserts that the SAPA significantly reduces the odds that MLB will be forced to substantially change its minor-league pay practices in the future. At the same time, the article also evaluates the broader implications of the SAPA for federal minimum-wage and maximum-hour law generally.
{"title":"The Save America's Pastime Act: Special-Interest Legislation Epitomized","authors":"N. Grow","doi":"10.2139/SSRN.3169957","DOIUrl":"https://doi.org/10.2139/SSRN.3169957","url":null,"abstract":"Buried deep within the 2,232-page omnibus federal spending bill passed by Congress in March 2, was an obscure, half-page provision entitled the “Save America’s Pastime Act” (SAPA). The SAPA was inserted into the spending bill at the last minute at the behest of Major League Baseball (MLB), following several years—and several million dollars—worth of lobbying efforts. MLB pursued the legislation to insulate its minor-league pay practices from legal challenge after they had become the subject of a federal class-action lawsuit alleging that the league’s teams failed to pay minor-league players in accordance with the Fair Labor Standards Act’s (FLSA) minimum-wage and overtime provisions. The SAPA helps shield MLB from these claims by creating a new statutory exemption largely excluding most professional baseball players from the protections of the FLSA. \u0000This article provides the first substantive analysis of the SAPA. Specifically, it asserts that although initial assessments concluded that the provision would shield MLB from any future liability for its minor-league pay practices, a closer reading of the statute reveals that it contains several potential ambiguities that could arguably give rise to unanticipated liability for the league. Nevertheless, the article asserts that the SAPA significantly reduces the odds that MLB will be forced to substantially change its minor-league pay practices in the future. At the same time, the article also evaluates the broader implications of the SAPA for federal minimum-wage and maximum-hour law generally.","PeriodicalId":105430,"journal":{"name":"ERN: Formal & Relational Contracts Between Employers & Employees (Topic)","volume":"111 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132706067","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We explore how the timings of compensation payments and contract terminations are jointly determined in a continuous-time principal–agent model under the discretionary termination policy of investors (the principal) when the manager (agent) has loss–averse preferences. Our theoretical findings provide several new empirical implications for backloaded compensation and forced managerial turnover. Our model also shows that mandatory deferral regulation governing incentive pay induces investors to terminate the contract relation earlier and results in the more frequent replacement of managers.
{"title":"Dynamic Contract and Discretionary Termination Policy Under Loss Aversion","authors":"K. Hori, Hiroshi Osano","doi":"10.2139/ssrn.3266921","DOIUrl":"https://doi.org/10.2139/ssrn.3266921","url":null,"abstract":"Abstract We explore how the timings of compensation payments and contract terminations are jointly determined in a continuous-time principal–agent model under the discretionary termination policy of investors (the principal) when the manager (agent) has loss–averse preferences. Our theoretical findings provide several new empirical implications for backloaded compensation and forced managerial turnover. Our model also shows that mandatory deferral regulation governing incentive pay induces investors to terminate the contract relation earlier and results in the more frequent replacement of managers.","PeriodicalId":105430,"journal":{"name":"ERN: Formal & Relational Contracts Between Employers & Employees (Topic)","volume":"177 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130185538","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2015-02-01DOI: 10.1108/S0742-618620140000021006
A. S. Litwin
Abstract Although many employers continue to adopt various forms of worker participation or employee involvement, expected positive gains often fail to materialize. One explanation for the weak or altogether missing performance effects is that researchers rely on frameworks that focus almost exclusively on contingencies related to the workers themselves or to the set of tasks subject to participatory processes. This study is premised on the notion that a broader examination of the employment relationship within which a worker participation program is embedded reveals a wider array of factors impinging upon its success. I integrate labor relations theory into existing insights from the strategic human resource management literature to advance an alternative framework that additionally accounts for structures and processes above the workplace level – namely, the (potentially implicit) contract linking employees to the organization and the business strategies enacted by the latter. The resulting propositions suggest that the performance-enhancing impact of worker participation hinges on the presence of participatory or participation-supporting structures at all three levels of the employment relationship. I conclude with implications for participation research.
{"title":"Nose to Tail: Using the Whole Employment Relationship to Link Worker Participation to Operational Performance","authors":"A. S. Litwin","doi":"10.1108/S0742-618620140000021006","DOIUrl":"https://doi.org/10.1108/S0742-618620140000021006","url":null,"abstract":"Abstract \u0000Although many employers continue to adopt various forms of worker participation or employee involvement, expected positive gains often fail to materialize. One explanation for the weak or altogether missing performance effects is that researchers rely on frameworks that focus almost exclusively on contingencies related to the workers themselves or to the set of tasks subject to participatory processes. This study is premised on the notion that a broader examination of the employment relationship within which a worker participation program is embedded reveals a wider array of factors impinging upon its success. I integrate labor relations theory into existing insights from the strategic human resource management literature to advance an alternative framework that additionally accounts for structures and processes above the workplace level – namely, the (potentially implicit) contract linking employees to the organization and the business strategies enacted by the latter. The resulting propositions suggest that the performance-enhancing impact of worker participation hinges on the presence of participatory or participation-supporting structures at all three levels of the employment relationship. I conclude with implications for participation research.","PeriodicalId":105430,"journal":{"name":"ERN: Formal & Relational Contracts Between Employers & Employees (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132293243","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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