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Executive Compensation And Tournament Theory
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Book Synopsis Tournament Theory and its Relevance to Executive Pay by : David Jamin Schneider
Download or read book Tournament Theory and its Relevance to Executive Pay written by David Jamin Schneider and published by GRIN Verlag. This book was released on 2011-06-15 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essay from the year 2010 in the subject Business economics - Business Management, Corporate Governance, grade: 2,0, Murdoch University (Business School), course: Managing Remuneration, Benefits & Motivation, language: English, abstract: This assignment deals with the issue of tournament theory and will give an insight in its theoretical background and its relevance to executive pay. Moreover, the following pages will display the impacts of the tournament theory on organizations and its employees within a business context.
Book Synopsis Executive Compensation and Tournament Theory by : Tor Eriksson
Download or read book Executive Compensation and Tournament Theory written by Tor Eriksson and published by . This book was released on 1996 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Explaining Pay Without Performance by : Iman Anabtawi
Download or read book Explaining Pay Without Performance written by Iman Anabtawi and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: After only a brief hiatus in the wake of the stock market downturn of 2000, Chief Executive Officer (CEO) pay levels have resumed their upward trajectory. In response, many influential shareholders and academics are asking the question: Are the executive compensation arrangements we observe examples of optimal contracting between CEOs and the boards of directors of the firms they manage, according to which executives are rewarded for enhancing shareholder value? Or do such arrangements indicate a corporate governance failure, whereby CEOs exercise so much influence over boards that managers are effectively setting their own pay? The foregoing accounts - optimal contracting and managerial power, respectively - dominate current explanations of how executive pay is structured. In this Article, I demonstrate that neither explains adequately observed executive pay arrangements. Instead, I turn to the paradigm of tournament theory-in which CEO pay is a prize awarded to the winner of a competition to get to the top of the corporate ladder; to illuminate the structure of executive pay. Introducing tournament theory into the mix of how firms motivate their CEOs can explain features of CEO pay that are either inconsistent with, or deemed inefficient by, competing theories. Because one's view of how executive pay arrangements should be designed has significant implications for our assessment of actual executive pay practices, I argue that we should consider the role that tournaments can play in motivating executives before undertaking reforms in the executive pay arena. Optimal contracting theory, in which boards of directors are assumed to be designing pay-for-performance contracts to align the interests of managers with those of shareholders, remains the dominant lens through which executive pay arrangements are analyzed. Observed executive pay contracting fails, however, to conform to the optimal contracting model. Rather than linking compensation to performance, pay arrangements for executives do not reveal a statistically significant relationship between the two. This anomaly has puzzled scholars in the executive compensation area and generated a vigorous debate over pay without performance.
Book Synopsis Labor Economics, second edition by : Pierre Cahuc
Download or read book Labor Economics, second edition written by Pierre Cahuc and published by MIT Press. This book was released on 2014-08-01 with total page 1081 pages. Available in PDF, EPUB and Kindle. Book excerpt: The new edition of a widely used, comprehensive graduate-level text and professional reference covering all aspects of labor economics, with substantial new material. This landmark graduate-level text combines depth and breadth of coverage with recent, cutting-edge work in all the major areas of modern labor economics. Its command of the literature and its coverage of the latest theoretical, methodological, and empirical developments make it also a valuable resource for practicing labor economists. This second edition has been substantially updated and augmented. It incorporates examples drawn from many countries, and it presents empirical methods using contributions that have proved to be milestones in labor economics. The data and codes of these research publications, as well as numerous tables and figures describing the functioning of labor markets, are all available on a dedicated website (www.labor-economics.org), along with slides that can be used as course aids and a discussion forum. This edition devotes more space to the analysis of public policy and the levers available to policy makers, with new chapters on such topics as discrimination, globalization, income redistribution, employment protection, and the minimum wage or labor market programs for the unemployed. Theories are explained on the basis of the simplest possible models, which are in turn related to empirical results. Mathematical appendixes provide a toolkit for understanding the models.
Book Synopsis Tournament Theory - Basic Model, Theoretical Implications, and Empirical Evidence by : Denis Drechsler
Download or read book Tournament Theory - Basic Model, Theoretical Implications, and Empirical Evidence written by Denis Drechsler and published by GRIN Verlag. This book was released on 2012-04-19 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2004 in the subject Leadership and Human Resources - Miscellaneous, grade: 1, University of Wisconsin-Milwaukee, language: English, abstract: Wie lassen sich Unterschiede im Lohnniveau erklären? Tournament Theory vertritt die Ansicht, dass Firmen eine auf Anreize ausgelegte Beförderungsstrukture wählen, die einem Turnier gleicht. Damit, so die Befürworter der Theorie, lassen sich die hohen Gehälter von Unternehmensvorständen sowie die weite Spanne zwischen den Gehältern der Unternemensführung sowie der übrigen Belegschaft erklären. Die vorliegende Arbeit präsentiert die Grundtheorie und erläutert anhand vieler Beispiele, wie diese Anwendung finden kann im täglichen Leben. Untersucht werden u.a. die Bereiche des professionellen Sports, große Aktienunternehmen sowie kleine und mittelständische Unternehmen.
Book Synopsis Compensation and Organizational Performance by : Luis R. Gomez-Mejia
Download or read book Compensation and Organizational Performance written by Luis R. Gomez-Mejia and published by Routledge. This book was released on 2014-12-18 with total page 366 pages. Available in PDF, EPUB and Kindle. Book excerpt: This up-to-date, research-oriented textbook focuses on the relationship between compensation systems and firm overall performance. In contrast to more traditional compensation texts, it provides a strategic perspective to compensation administration rather than a functional viewpoint. The text emphasizes the role of managerial pay, its importance, determinants, and impact on organizations. It analyzes recent topics in executive compensation, such as pay in high technology firms, managerial risk taking, rewards in family companies, and the link between compensation and social responsibility and ethical issues, among others. The authors provide a thorough and comprehensive review of the vast literatures relevant to compensation and revisit debates grounded in different theoretical perspectives. They provide insights from disciplines as diverse as management, economics, sociology, and psychology, and amplify previous discussions with the latest empirical findings on compensation, its dynamics, and its contribution to firm overall performance.
Book Synopsis The Tournament as a Model for Executive Compensation by : Albert Rees
Download or read book The Tournament as a Model for Executive Compensation written by Albert Rees and published by . This book was released on 1992 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Handbook of the Economics of Corporate Governance by : Benjamin Hermalin
Download or read book The Handbook of the Economics of Corporate Governance written by Benjamin Hermalin and published by Elsevier. This book was released on 2017-09-18 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of the Economics of Corporate Governance, Volume One, covers all issues important to economists. It is organized around fundamental principles, whereas multidisciplinary books on corporate governance often concentrate on specific topics. Specific topics include Relevant Theory and Methods, Organizational Economic Models as They Pertain to Governance, Managerial Career Concerns, Assessment & Monitoring, and Signal Jamming, The Institutions and Practice of Governance, The Law and Economics of Governance, Takeovers, Buyouts, and the Market for Control, Executive Compensation, Dominant Shareholders, and more. Providing excellent overviews and summaries of extant research, this book presents advanced students in graduate programs with details and perspectives that other books overlook. Concentrates on underlying principles that change little, even as the empirical literature moves on Helps readers see corporate governance systems as interrelated or even intertwined external (country-level) and internal (firm-level) forces Reviews the methodological tools of the field (theory and empirical), the most relevant models, and the field’s substantive findings, all of which help point the way forward
Book Synopsis Incentives for Helping on the Job by : Gerald T. Garvey
Download or read book Incentives for Helping on the Job written by Gerald T. Garvey and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent advances in incentive theory stress the multi- dimensional nature of agent effort and specifically cases where workers affect one another's performance through "helping" efforts. This paper models helping efforts as determined by the compensation package and task allocation. The model is tested with Australian evidence on reported helping efforts within workgroups. The evidence consistently supports the hypothesis that helping efforts are reduced, while individual efforts are increased, when promotion incentives are strong. Piece rates and profit-sharing appear to have little effect on helping efforts. Contrary to the predictions of some recent theoretical models, task variety and helping efforts are positively correlated.
Download or read book Compensation written by Barry Gerhart and published by SAGE. This book was released on 2003-05-07 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: `Gerhart and Rynes provide a thorough, comprehensive review of the vast literatures relevant to compensation. Their insights regarding the integration of economic, psychological and management perspectives are particularly enlightening. This text provides an invaluable tool for those interested in advancing our understanding of compensation practices' - Alison Barber, Eli Broad College of Business, Michigan State UniversityCompensation provides a comprehensive, research-based review of both the determinants and effects of compensation. Combining theory and research from a variety of disciplines, authors Barry Gerhart and Sara Rynes examine the three major compensation decisions - pay level, pay structure and pay delivery systems.Revealing the impact of different compensation policies, this interdisciplinary volume examines: the relationship between performance-based pay and intrinsic motivation; implications of individual pay differentials for team or unit performance; the consequences of pay for performance policies; effect sizes and practical significance of compensation findings; and directions for future research.Compensation considers why organizations pay people the way they do and how various pay strategies influence the success of organizations. Critically evaluating areas where research is inconsistent with common beliefs, Gerhart and Rynes explore the motivational effects of compensation.Primarily intended for graduate students in human resource management, psychology, and organizational behaviour courses, this book is also an invaluable reference for compensation management consultants and organizational development specialists.
Book Synopsis An Introduction to Executive Compensation by : Steven Balsam
Download or read book An Introduction to Executive Compensation written by Steven Balsam and published by Academic Press. This book was released on 2002 with total page 410 pages. Available in PDF, EPUB and Kindle. Book excerpt: General readers have no idea why people should care about what executives are paid and why they are paid the way they are. That's the reason that The Wall Street Journal, Fortune, Forbes, and other popular and practitioner publications have regular coverage on them. This book not only proposes a reason - executives need incentives in order to maximize firm value (economists call this agency theory) - it also describes the nature and design of executive compensation practices. Those incentives can take the form of benefits (salary, stock options), or prerquisites (reflecting the status of the executive within the organizational culture.
Book Synopsis Compensation Gaps Among Top Executives by : Ronald W. Masulis
Download or read book Compensation Gaps Among Top Executives written by Ronald W. Masulis and published by . This book was released on 2017 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the determinants of compensation gaps between a firm's CEO and its other top executives, and compare the ability of two competing optimal contracting theories, namely tournament theory and productivity theory, to explain the cross sectional variability in these gaps across firms. We find little evidence that firms design their executive compensation policies in a manner consistent with tournament theory. Our strongest evidence against tournament theory is from firms most likely to conduct tournament contests for selecting CEOs, which is prior to CEO turnovers, especially planned retirements, and in industries where firm-specific human capital is high. Empirically, we find that tournament predictions have weak explanatory power in these samples. In contrast, we find robust evidence that compensation is strongly linked to senior executives' productivity measures, and that productivity differences among executives explain a large part of the cross sectional and time series variability in firm compensation gaps.
Book Synopsis Pay Without Performance by : Lucian A. Bebchuk
Download or read book Pay Without Performance written by Lucian A. Bebchuk and published by Harvard University Press. This book was released on 2004 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Executive Compensation, Strategic Competition, and Relative Performance Evaluation by : Raj Aggarwal
Download or read book Executive Compensation, Strategic Competition, and Relative Performance Evaluation written by Raj Aggarwal and published by . This book was released on 1996 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: We argue that strategic interactions between firms in an oligopoly can explain the puzzling lack of high-powered incentives in executive compensation contracts written by shareholders whose objective is to maximize the value of their shares. We derive the optimal compensation contracts for managers and demonstrate that the use of high-powered incentives will be limited by the need to soften product market competition. In particular, when managers can be compensated based on their own and their rivals' performance, we show that there will be an inverse relationship between the magnitude of high-powered incentives and the degree of competition in the industry. More competitive industries are characterized by weaker pay-performance incentives. Empirically, we find strong evidence of this inverse relationship in the compensation of executives in the United States. Our econometric results are not consistent with alternative theories of the effect of competition on executive compensation. We conclude that strategic considerations can preclude the use of high-powered incentives, in contrast to the predictions of the standard principal-agent model.
Book Synopsis Corporate Governance and Enterprise Reform in China by : Stoyan Tenev
Download or read book Corporate Governance and Enterprise Reform in China written by Stoyan Tenev and published by World Bank Publications. This book was released on 2002 with total page 188 pages. Available in PDF, EPUB and Kindle. Book excerpt: As China continues in its evolution from a planned economy to a market economy, and from an agricultural to a manufacturing and service-oriented economy, issues arising from owner diversification, corporate governance, and labor resource allocation have come to the forefront. Most particularly, corporate governance is being focused on as the state continues its withdrawal from direct ownership. This study evaluates short- and medium- term corporate governance issues impacting companies involved in ownership diversification. It examines problems associated with governance such as cost and framework design and makes recommendations concerning the many facets of corporate governance.
Book Synopsis Tournament of Managers by : Usha Rodrigues
Download or read book Tournament of Managers written by Usha Rodrigues and published by . This book was released on 2018 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Why do firms usually make, not buy, their chief executive officers (CEOs)? Public corporations hire their CEOs from within the firm 78% of the time. They do so although earlier studies have found no clear evidence that internal hires perform better than external ones. So why do firms prefer them? Few scholars have focused on this simple question.The reason why firms favor internal candidates matters not only in its own right, but also for an overlooked reason: it informs the controversial question of executive compensation. Currently board-compensation committees look to peer benchmarks to set executive pay. But, taking cues from comparable companies presumes a robust managerial market, one where firms must pay their CEOs "market price" or risk poaching. If firms predominantly hire from within, it is far from clear why benchmarking, with its concomitant upward pressure on executive pay across the board, is appropriate.Why firms hire internal candidates thus provides a theoretical basis for determining appropriate pay. For example, if candidates' superior knowledge of the institution (firms specific capital) drives the internal preference, then firms can pay less than a "market" rate because no true market for managers exists: a CEO's value is tied up with a particular firm, and he cannot credibly threaten to leave. Similarly, if firms promote from within to inspire competition in lower ranks (tournament theory), then compensation should reflect the price needed to incentivize lower ranks to compete to become CEO. In contrast, if the board's better information on internal candidates (informational asymmetry) explains the preference, then a true market may exist for externals able to demonstrate their superiority. Which of these theories is motivating boards to favor internal candidates?To answer this question, this Article considers leadership in an area where the firm specific capital and information asymmetry explanations apply, but a tournament is absent: academia. Analysis of a sample of top university presidents reveals a bias in favor of external, rather than internal, candidates. This finding suggests that the tournament theory motivates public firms and has important implications for executive compensation policy.
Book Synopsis Executive Compensation, Strategic Competition, and Relative Performance, Theory and Evidence by : Rejesh Aggarwal
Download or read book Executive Compensation, Strategic Competition, and Relative Performance, Theory and Evidence written by Rejesh Aggarwal and published by . This book was released on 1996 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
