For many managers who have been granted them, stock-options represent a significant share of their wealth, in certain cases several times the value of other assets. This tends to create a serious unbalance in the structure of their total portfolio, with an excessive exposure to their firm’s stock value, and also an excessive exposure to its volatility. The result of that lack of diversification is that stock-options, unless hedged, may be worth less to the holder than their market, or model, value. The value loss may be quantified. With reasonable parameters for risk aversion, stock-options are worth to the holder 50 percent of their market value if that market value is equivalent to half the value of other assets, 30 percent if it is equivalent to the value of other assets, and 20 percent if it is equivalent to twice that value. The loss is greater the higher the exercise price is: stock-options worth the equivalent of the other assets in market terms are worth to the holder 30 percent for options just at the money, 10 percent for a strike twice the share value, and 85 per cent for very low strikes which make options equivalent to the underlying stock. The gap between market value and value to the holder also increases with stock volatility, whether it comes from a high beta or from a high specific volatility (the latter has a little more influence). It increases with the holder’s risk aversion. Those findings certainly point to efficiency problems in the use of stock-options as a management tool. In addition, it is shown that the loss comes as well from the exposure to the stock’s volatility as from the exposure to the stock’s value. This means that the mitigation of risk that could be expected, in the managed part of wealth, by reducing the exposure to (or even shorting) the risky assets, or better reducing the exposure to the firm’s stock, will be limited, except if the options are largely out of the money. However, a full coverage of options would conflict with their incentive objectives. There is quite an important literature on stock-options and stock grants and their efficiency in terms of compensation tool, and on their tax treatment. This paper builds on that literature but focuses on a portfolio management issue.
{"title":"Stock-Options and Portfolio Management","authors":"Didier Maillard","doi":"10.2139/ssrn.1775065","DOIUrl":"https://doi.org/10.2139/ssrn.1775065","url":null,"abstract":"For many managers who have been granted them, stock-options represent a significant share of their wealth, in certain cases several times the value of other assets. This tends to create a serious unbalance in the structure of their total portfolio, with an excessive exposure to their firm’s stock value, and also an excessive exposure to its volatility. The result of that lack of diversification is that stock-options, unless hedged, may be worth less to the holder than their market, or model, value. The value loss may be quantified. With reasonable parameters for risk aversion, stock-options are worth to the holder 50 percent of their market value if that market value is equivalent to half the value of other assets, 30 percent if it is equivalent to the value of other assets, and 20 percent if it is equivalent to twice that value. The loss is greater the higher the exercise price is: stock-options worth the equivalent of the other assets in market terms are worth to the holder 30 percent for options just at the money, 10 percent for a strike twice the share value, and 85 per cent for very low strikes which make options equivalent to the underlying stock. The gap between market value and value to the holder also increases with stock volatility, whether it comes from a high beta or from a high specific volatility (the latter has a little more influence). It increases with the holder’s risk aversion. Those findings certainly point to efficiency problems in the use of stock-options as a management tool. In addition, it is shown that the loss comes as well from the exposure to the stock’s volatility as from the exposure to the stock’s value. This means that the mitigation of risk that could be expected, in the managed part of wealth, by reducing the exposure to (or even shorting) the risky assets, or better reducing the exposure to the firm’s stock, will be limited, except if the options are largely out of the money. However, a full coverage of options would conflict with their incentive objectives. There is quite an important literature on stock-options and stock grants and their efficiency in terms of compensation tool, and on their tax treatment. This paper builds on that literature but focuses on a portfolio management issue.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124270446","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}
We investigate the relationship between chief executive officer (CEO) compensation and innovation. In an empirical examination of compensation contracts of S&P 400, 500, and 600 firms we find that long-term incentives in the form of options are positively related to patents and citations to patents. In addition, convexity of options has a positive effect on innovation. We also find no relationship between pay for performance sensitivity (PPS) with patents and citations to patents while we did discover a positive relationship between these and golden parachutes. Finally, we show that subsequent to project failure managers compensation contracts are reset favourably. We provide support for the theory that compensation contracts that offer long-term commitment and protection from failure are more suitable for innovation
{"title":"Incentives and Innovation: Evidence from CEO Compensation Contracts","authors":"Bill Francis, I. Hasan, Zenu Sharma","doi":"10.2139/ssrn.1762621","DOIUrl":"https://doi.org/10.2139/ssrn.1762621","url":null,"abstract":"We investigate the relationship between chief executive officer (CEO) compensation and innovation. In an empirical examination of compensation contracts of S&P 400, 500, and 600 firms we find that long-term incentives in the form of options are positively related to patents and citations to patents. In addition, convexity of options has a positive effect on innovation. We also find no relationship between pay for performance sensitivity (PPS) with patents and citations to patents while we did discover a positive relationship between these and golden parachutes. Finally, we show that subsequent to project failure managers compensation contracts are reset favourably. We provide support for the theory that compensation contracts that offer long-term commitment and protection from failure are more suitable for innovation","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-02-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115471303","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}
At a time when many aspects of American capitalism are being questioned, Frank Koller’s “Spark” puts the spotlight on the US economy's proclivity for mass layoffs. Lincoln Electric, a Fortune 1000 company located in Cleveland, Ohio, has bucked this trend by maintaining a no lay-off policy for decades; nonetheless, it is still standing, prospering in a mature industry in the heart of America’s rustbelt, the last major survivor of Cleveland’s formerly vibrant industrial district, which at the turn of the 20th Century was the Silicon Valley of its day. Why and how this model has worked for Lincoln Electric, what steady work has meant to generations of its employees and by extension to their families and their communities, and whether this business model can be exported to other companies are questions explored in “Spark” through interviews with the company’s executives, its active and retired workers and their families, academic experts, labor leaders, Wall Street analysts, and CEOs of other companies. This book makes an important claim that deserves close attention from government and industry leaders, as well as researchers, namely that it is possible to avoid mass layoffs and thus to mitigate the pernicious effects of economic downturns on workers, their families and their communities, even as patient shareholders are well served in the longer run.
{"title":"Book Review: Spark: How Old-Fashioned Values Drive a Twenty-First-Century Corporation: Lessons from Lincoln Electric’s Unique Guaranteed Employment Program","authors":"Dan Ciuriak","doi":"10.2139/SSRN.1739804","DOIUrl":"https://doi.org/10.2139/SSRN.1739804","url":null,"abstract":"At a time when many aspects of American capitalism are being questioned, Frank Koller’s “Spark” puts the spotlight on the US economy's proclivity for mass layoffs. Lincoln Electric, a Fortune 1000 company located in Cleveland, Ohio, has bucked this trend by maintaining a no lay-off policy for decades; nonetheless, it is still standing, prospering in a mature industry in the heart of America’s rustbelt, the last major survivor of Cleveland’s formerly vibrant industrial district, which at the turn of the 20th Century was the Silicon Valley of its day. Why and how this model has worked for Lincoln Electric, what steady work has meant to generations of its employees and by extension to their families and their communities, and whether this business model can be exported to other companies are questions explored in “Spark” through interviews with the company’s executives, its active and retired workers and their families, academic experts, labor leaders, Wall Street analysts, and CEOs of other companies. This book makes an important claim that deserves close attention from government and industry leaders, as well as researchers, namely that it is possible to avoid mass layoffs and thus to mitigate the pernicious effects of economic downturns on workers, their families and their communities, even as patient shareholders are well served in the longer run.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-01-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115538950","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 : 2010-12-02DOI: 10.1111/j.1540-5850.2010.00970.x
W. Hildreth, S. Yeager, G. Miller, J. Rabin
Little is known about successful local government financial management careers and their implications for organizations. This study identifies three levels of career success - top managers, aspirants, and the plateaued status - and how these groups differ on important personal and professional characteristics. Findings reveal that top managers differ in important ways from aspirants and the plateaued. Furthermore, top managers hired from outside the organization pay more attention to the financial viability of the organization and are more willing to innovate financially than those promoted from within. Results have implications for professionals, their employing organizations, educators, and the ethics of government finance.
{"title":"Implications of Successful Career Paths of Top Local Government Finance Managers","authors":"W. Hildreth, S. Yeager, G. Miller, J. Rabin","doi":"10.1111/j.1540-5850.2010.00970.x","DOIUrl":"https://doi.org/10.1111/j.1540-5850.2010.00970.x","url":null,"abstract":"Little is known about successful local government financial management careers and their implications for organizations. This study identifies three levels of career success - top managers, aspirants, and the plateaued status - and how these groups differ on important personal and professional characteristics. Findings reveal that top managers differ in important ways from aspirants and the plateaued. Furthermore, top managers hired from outside the organization pay more attention to the financial viability of the organization and are more willing to innovate financially than those promoted from within. Results have implications for professionals, their employing organizations, educators, and the ethics of government finance.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"50 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133930799","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}
Using data from the Health and Retirement Study (HRS), we analyze trends in voluntary, pressured, and forced quits and risk factors associated with each type of quit. We show that leaving one's age-50 job between ages 50 and 56 in any of the above circumstances more than doubles the likelihood that an individual will be working part-time at age 60, relative to a base case of working full-time. Pressured and forced quits also substantially increase the likelihood that the individual will not be working for pay at that age. Statistical tests confirm that pressured quits represent a separate and distinct category with its own risk factors and that they cannot be regarded as a subset of either voluntary or forced quits. We further show that job loss between ages 50 and 56, regardless of the circumstances, is associated with "messy" post-displacement employment histories that are not fully captured by analyses that focus solely on the first post-displacement job. The effects of job displacement are long-lasting. Displaced workers are more likely to job-hop, to suffer further involuntary job losses, and to experience subsequent unemployment than those who were still working for their age-50 employer at age 56. Accumulating sufficient resources to provide an adequate income in retirement requires most individuals to work well into their 60s, preferably in well-paid, pensioned employment. Individuals who separate from their age-50 employer for whatever reason are at risk of missing out on their peak savings years and failing to prepare adequately for retirement.
{"title":"Is the Reduction in Older Workers' Job Tenure a Cause for Concern?","authors":"S. Sass, A. Webb","doi":"10.2139/ssrn.1718519","DOIUrl":"https://doi.org/10.2139/ssrn.1718519","url":null,"abstract":"Using data from the Health and Retirement Study (HRS), we analyze trends in voluntary, pressured, and forced quits and risk factors associated with each type of quit. We show that leaving one's age-50 job between ages 50 and 56 in any of the above circumstances more than doubles the likelihood that an individual will be working part-time at age 60, relative to a base case of working full-time. Pressured and forced quits also substantially increase the likelihood that the individual will not be working for pay at that age. Statistical tests confirm that pressured quits represent a separate and distinct category with its own risk factors and that they cannot be regarded as a subset of either voluntary or forced quits. We further show that job loss between ages 50 and 56, regardless of the circumstances, is associated with \"messy\" post-displacement employment histories that are not fully captured by analyses that focus solely on the first post-displacement job. The effects of job displacement are long-lasting. Displaced workers are more likely to job-hop, to suffer further involuntary job losses, and to experience subsequent unemployment than those who were still working for their age-50 employer at age 56. Accumulating sufficient resources to provide an adequate income in retirement requires most individuals to work well into their 60s, preferably in well-paid, pensioned employment. Individuals who separate from their age-50 employer for whatever reason are at risk of missing out on their peak savings years and failing to prepare adequately for retirement.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131379224","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 : 2010-11-19DOI: 10.1111/j.1468-2389.2010.00525.x
Antonio L. Garca-Izquierdo, Herman Aguinis, Pedro J. Ramos-Villagrasa
We conducted a content analysis of online job application forms used by companies listed on the Spanish Stock Exchange (i.e., Bolsa de Madrid). We collected data from 76 companies in 2005 and then again for 66 of these companies in 2009. We coded the type of information required on the application forms based on 24 categories related to potential illegal discrimination and personnel selection social context issues (i.e., fairness, intrusiveness, and privacy). Results indicated that the relative frequency of the 24 information categories has remained stable from 2005 to 2009. Moreover, averaging 2005 and 2009 results, a large percentage of companies require information that can be used for illegal discrimination and can be perceived as unfair, intrusive, and invasive of applicants' privacy such as age or date of birth (87%), nationality (61%), marital status (48%), place of birth (57%), passport number (47%), a photograph (23%), and number of children (11%). Our results document a science-practice gap in e-recruitment because scholarly research suggests that requesting these types of information leads to negative applicant reactions ranging from negative perceptions and emotions to actually initiating legal action against the recruiting firm. Our results also point to e-recruitment as an area that could be targeted as a good collaboration topic between scientists and practitioners because the resulting research has the potential to make important contributions toward bridging the science-practice gap.
{"title":"Science-practice Gap in E-Recruitment","authors":"Antonio L. Garca-Izquierdo, Herman Aguinis, Pedro J. Ramos-Villagrasa","doi":"10.1111/j.1468-2389.2010.00525.x","DOIUrl":"https://doi.org/10.1111/j.1468-2389.2010.00525.x","url":null,"abstract":"We conducted a content analysis of online job application forms used by companies listed on the Spanish Stock Exchange (i.e., Bolsa de Madrid). We collected data from 76 companies in 2005 and then again for 66 of these companies in 2009. We coded the type of information required on the application forms based on 24 categories related to potential illegal discrimination and personnel selection social context issues (i.e., fairness, intrusiveness, and privacy). Results indicated that the relative frequency of the 24 information categories has remained stable from 2005 to 2009. Moreover, averaging 2005 and 2009 results, a large percentage of companies require information that can be used for illegal discrimination and can be perceived as unfair, intrusive, and invasive of applicants' privacy such as age or date of birth (87%), nationality (61%), marital status (48%), place of birth (57%), passport number (47%), a photograph (23%), and number of children (11%). Our results document a science-practice gap in e-recruitment because scholarly research suggests that requesting these types of information leads to negative applicant reactions ranging from negative perceptions and emotions to actually initiating legal action against the recruiting firm. Our results also point to e-recruitment as an area that could be targeted as a good collaboration topic between scientists and practitioners because the resulting research has the potential to make important contributions toward bridging the science-practice gap.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"191 12","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117536616","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}
We analyze the interaction between financial institutions' internal compensation policy, the quality of loans, and their securitization decision. We also assess the case for requiring financial institutions to defer bonus pay so as to make incentives more commensurate with the longer-term risk of their transactions. While mandatory deferred compensation can improve the quality of loans, we also show when it has the opposite effect. We further analyze when mandatory deferred compensation can complement a policy that requires financial institutions to retain a minimum exposure to their originated loans, and we discuss the impact of a tax on short-term bonus pay. Generally, our modeling framework allows us to study the interaction of financial institutions' internal agency problems with the external agency problem that arises from securitization.
{"title":"Securitization and Compensation in Financial Institutions","authors":"R. Inderst, Sebastian Pfeil","doi":"10.2139/ssrn.1690742","DOIUrl":"https://doi.org/10.2139/ssrn.1690742","url":null,"abstract":"We analyze the interaction between financial institutions' internal compensation policy, the quality of loans, and their securitization decision. We also assess the case for requiring financial institutions to defer bonus pay so as to make incentives more commensurate with the longer-term risk of their transactions. While mandatory deferred compensation can improve the quality of loans, we also show when it has the opposite effect. We further analyze when mandatory deferred compensation can complement a policy that requires financial institutions to retain a minimum exposure to their originated loans, and we discuss the impact of a tax on short-term bonus pay. Generally, our modeling framework allows us to study the interaction of financial institutions' internal agency problems with the external agency problem that arises from securitization.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130087781","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}
In an aging society, it is important to gain insight in the factors explaining why the transition from unemployment to employment gets harder as people move from mid to late career. This study focuses on one related aspect: individuals’ wage setting behaviour. The study explores the relationship between age and the reservation wage for people in their mid and late career. We moreover investigate whether two employability factors, ‘willingness to move’ and ‘ease of movement’, mediate this relationship. Higher wage claims would not necessarily be problematic if they result from a stronger labour market position (ease of movement) and therefore a higher ‘market value.’ It would be more problematic if higher wage claims are a way to price oneself out of the labour market because of a low willingness to move. Path analysis on a sample of 8,113 Belgian workers aged 40 to 60 years reveals that age positively affects the reservation wage via willingness to move. Yet, this effect is neutralized by the negative influence via ease of movement. Our analyses moreover reveal a direct, positive effect of age on the reservation wage, if employability factors are controlled for. This finding suggests that wage claims are increasing if people move from mid to late career irrespective of their employability. We discuss implications for theory, practice and future research.
{"title":"The Impact of Age on the Reservation Wage: The Role of Employability","authors":"A. Coen, Anneleen Forrier, L. Sels","doi":"10.2139/ssrn.1620368","DOIUrl":"https://doi.org/10.2139/ssrn.1620368","url":null,"abstract":"In an aging society, it is important to gain insight in the factors explaining why the transition from unemployment to employment gets harder as people move from mid to late career. This study focuses on one related aspect: individuals’ wage setting behaviour. The study explores the relationship between age and the reservation wage for people in their mid and late career. We moreover investigate whether two employability factors, ‘willingness to move’ and ‘ease of movement’, mediate this relationship. Higher wage claims would not necessarily be problematic if they result from a stronger labour market position (ease of movement) and therefore a higher ‘market value.’ It would be more problematic if higher wage claims are a way to price oneself out of the labour market because of a low willingness to move. Path analysis on a sample of 8,113 Belgian workers aged 40 to 60 years reveals that age positively affects the reservation wage via willingness to move. Yet, this effect is neutralized by the negative influence via ease of movement. Our analyses moreover reveal a direct, positive effect of age on the reservation wage, if employability factors are controlled for. This finding suggests that wage claims are increasing if people move from mid to late career irrespective of their employability. We discuss implications for theory, practice and future research.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"72 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123875171","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}
We investigate the impact of adopting an enterprise resource planning (ERP) system on performance changes and employee outcomes in a retail chain. We find that: (i) sales and inventory turnover initially drop by 7 % and recover in 6-12 months; (ii) inventory turnover recovers more quickly for establishments that adopt ERP later; (iii) employee outcomes, including increased workload, greater job difficulty and enhanced multitasking, vary significantly over time, though implications for employee welfare are ambiguous.
{"title":"Firm and Employee Effects of an Enterprise Information System: Micro-Econometric Evidence","authors":"Derek C. Jones, P. Kalmi, A. Kauhanen","doi":"10.2139/ssrn.1650129","DOIUrl":"https://doi.org/10.2139/ssrn.1650129","url":null,"abstract":"We investigate the impact of adopting an enterprise resource planning (ERP) system on performance changes and employee outcomes in a retail chain. We find that: (i) sales and inventory turnover initially drop by 7 % and recover in 6-12 months; (ii) inventory turnover recovers more quickly for establishments that adopt ERP later; (iii) employee outcomes, including increased workload, greater job difficulty and enhanced multitasking, vary significantly over time, though implications for employee welfare are ambiguous.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116086746","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}
There is widespread concern about whether Chief Executive Officers (CEOs) are appropriately punished for poor performance. While CEOs are more likely to be forced out if their performance is poor relative to the industry average, overall industry performance also matters. This seems puzzling if termination is disciplinary, however, we show that both absolute and relative performance-driven turnover can be natural and efficient outcomes in a competitive assignment model in which CEOs and firms form matches based on multiple characteristics. The model also has new predictions about replacement managers' equilibrium pay and performance. We document CEO turnover events during 1992–2006 and provide empirical support for our model.
{"title":"CEO Turnover in a Competitive Assignment Framework","authors":"Andrea L. Eisfeldt, Camelia M. Kuhnen","doi":"10.2139/ssrn.1594785","DOIUrl":"https://doi.org/10.2139/ssrn.1594785","url":null,"abstract":"There is widespread concern about whether Chief Executive Officers (CEOs) are appropriately punished for poor performance. While CEOs are more likely to be forced out if their performance is poor relative to the industry average, overall industry performance also matters. This seems puzzling if termination is disciplinary, however, we show that both absolute and relative performance-driven turnover can be natural and efficient outcomes in a competitive assignment model in which CEOs and firms form matches based on multiple characteristics. The model also has new predictions about replacement managers' equilibrium pay and performance. We document CEO turnover events during 1992–2006 and provide empirical support for our model.","PeriodicalId":355618,"journal":{"name":"ERN: Other Organizations & Markets: Personnel Management (Topic)","volume":"56 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128101746","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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