Previous studies have explored the link between CEO pay and future business performance with mixed results. In some cases, higher CEO pay is linked to better results; other studies show the opposite: the companies of the highest paid CEOs perform less well, on average, than their more moderately paid counterparts. A research team from the […]
Read More… from High CEO Pay Leads to Overconfidence and Poor Results
Does hiring compensation consultants result in higher pay for CEOs? Until recently, academic studies exploring this question have yielded no evidence that CEOs use compensation consultants to justify higher pay. A new disclosure requirement from the Securities Exchange Commission (SEC), however, allows researchers to better differentiate the potential motives behind the hiring of compensation consultants […]
Read More… from How CEOs Strong-Arm Their Compensation Consultants to Get What They Want
The best students from the best universities and graduate schools will be attracted to the most desirable companies to work for in their industries. At first glance, it would seem that these ‘high-status’ companies would be able to unequivocally benefit from the influx of only the best and the brightest into their workforce. A best-in-class […]
Read More… from Why High-Status Companies that Attract the Best Fail to Keep Them
Motivation can be divided into two dimensions: outcome-focused and process-focused. With outcome-focused motivation, people are driven by the desire of an achievement. They want to finish the task so that the task is done. They want a finished report in hand and ready to be submitted; they want the presentation to be written and delivered. […]
Read More… from Can Employees Be Motivated by More than Money and Benefits?
The use of reference points — for example, a monthly sales quota of 20 sales — is at the heart of reference-dependent behavioural economic theories, the most influential being “prospect theory.” According to prospect theory, an outcome is evaluated based on a reference point. Failure to achieve the reference point (19 sales instead of 20) […]
Investment banking was once regulated mainly by ‘reputational incentives’: bankers were motivated to act in the client’s best interests by concern for the bank’s good name. It was a system that owed as much to pragmatism as integrity. Contracts relied on the honest exchange of information (about, for example, the quality of securities) and the […]
Read More… from Investment Banking: Technology and the Decline of Trust
The question of whether positive or negative incentives work better has long been a matter of debate in society. From biblical times to the very recent past, children were thought to be better motivated through negative incentives — known in the bible as the “rod” and two generations ago as “a good spanking” — than […]
It is important to draw a distinction between over-confidence and over-optimism in business. The former can be seen as a pejorative term, linked to arrogance and hubris, and the latter as more ‘neutral’. Over-confident managers underestimate the risks of their decisions; over-optimistic ones are biased towards larger growth projections than the figures suggest. So is […]
Read More… from Reasons to Be Cheerful: Positivity Linked to Profitability
Economic theory tells us that human capital, i.e. employee ability, is positively linked to productivity and that high performers should be rewarded. Strong financial incentives for performance, however, can carry unexpected costs for companies. (The financial crisis was but the most vivid demonstration of this.) A recent study of a private Polish retail bank suggests […]
“Excessive, shameful, soaring…” these are just some of the words used by the media when discussing executive compensation. Over the past two decades in particular, CEO compensation has increased exponentially, with many organizations drawing criticism for it. Though a 2013 article in The Wall Street Journal suggests that compensation seems to be somewhat levelled now, […]
Read More… from Smoke But No Fire: How Employees View CEO Pay
