Aligned Incentives Research Articles

Strategies for recruiting adolescents in rural areas in firearm injury research

BackgroundParticipant recruitment is a central aspect of human sciences research. Barriers to participant recruitment can be categorised into participant, recruiter and institutional factors. Firearm injury research poses unique barriers to...

Challenges and opportunities for continued access to effective antibiotics - what role for the EU?

Abstract Large pharmaceutical companies have withdrawn from antibiotic R&D because of the high risk of failure and because antibiotics are less profitable than other areas; small and medium-sized enterprises (SMEs), which now drive antibiotic R&D, face difficulty securing funding for preclinical and early clinical trials, and risk significant economic losses when launching new antibiotics. To reinvigorate the antibiotic pipeline, a holistic package of aligned incentives is required, which takes into account public health factors, improves return of investment while supporting SMEs, and considers operational feasibility including potential political, regulatory, legislative, industry and financial hurdles. This presentation will highlight the main options in this area. Improving access to effective antibiotics requires both short- and longer-term measures. Reducing regulatory administrative hurdles, engaging in good procurement practice, increasing joint purchasing efforts, and considering payment models that de-link revenue from sales can keep older (but effective) antibiotics on the market by ensuring their economic viability. Strengthening the mapping of production capacities and product availability can improve transparency and identify options for action, while stockpiling and strengthening manufacturing capacities within and outside of the EU can boost the supply chain itself. Concrete measures and their feasibility will be briefly presented. The EU has a major role to play by supporting antibiotic R&D and engaging with other international efforts to promote optimal deployment of incentives, by ensuring that the lack of access to appropriate and effective antibiotics is recognized as a threat to global health security, and by building on its relationships with international institutions to act as a facilitator in the global space towards ensuring synergies among existing structures, communicating the cost of inaction, and supporting national and regional initiatives. Speakers/Panelists Danilo Lo Fo Wong Division of Country Health Programmes, WHO/Europe, Copenhagen, Denmark Malin Grape Ministry of Health and Social Affairs, Stockholm, Sweden Lieven De Raedt Federal Public Service Health, Food Chain Safety and Environment, Brussels, Belgium

Advancing multi-regional research in Canada through collaboration.

ObjectivesCOVID-19 accentuated the importance of breaking down data siloes and aligning incentives for data access, collection, and use. Health Data Research Network Canada (HDRN Canada) is responding to this challenge, bringing together people and organizations to transform health data use in Canada. ApproachHDRN Canada’s foundation is its partnership of 20 pan-Canadian, provincial and territorial data organizations that together are enabling multi-regional research. This is being enriched with HDRN Canada’s development of the Canada Health Data Research Alliance (HDR Alliance). The HDR Alliance coordinates expansion of sources and types of data available while retaining organizational independence. A project-based pilot approach is underway with two large pan-Canadian, longitudinal, consented cohort studies being linked at HDRN Canada sites. In addition, a collaboration with a pan-Canadian COVID19 clinical trials network is ensuring that clinical data are collected in ways that enables linkage with population-based administrative data. ResultsHDRN Canada has created a single data access portal for researchers with information on over 500 datasets and supported 72 research projects to date. Work on the HDR Alliance adds data from the Canadian Partnership for Tomorrow’s Health and the Canadian Longitudinal Survey on Aging. The former includes 350,000 individuals, and survey data (including related to COVID-19), physical measures and genomics. The latter includes 50,000 individuals with survey data and physical measures. Four multi-region clinical trials are being planned with the support of HDRN Canada. Even with aligned incentives, challenges navigating data governance and access processes remain. Collaborations are necessary to address these complexities and enable access to richer data in an efficient and timely matter. ConclusionStrong partnerships are critical to unlocking the potential of Canada’s data assets and expertise. The HDR Alliance provides a collaboration mechanism to increase the “findability”, accessibility and utility of data assets, while addressing complex issues in the data landscape. This increases research opportunities and the impact of population-based, linkable data.

Firms’ Commitment to Sustainability: To What Extent is the Presence of Women on Boards Important?

Many firms are committed to Sustainable Development Goals, such as climate change, but their performance differs. Boards’ attention to sustainability might influence strategic decision making and consequently firms’ practices and ESG performance. Inspired by upper echelons theory, this study aims to examine the extent to which female board representation is important for ESG performance, considering board-management interactions. Building on past research, this study argues that women can enhance board monitoring and board strategy involvement, which can influence ESG performance. A configurational analysis is used, including different corporate governance mechanisms: board independence, female board representation, board orientation, CEO power and ESG-related executive compensation. The findings suggest that the presence of women on boards is important to firms’ ESG performance; however, it is not mandatory. A well-defined CSR strategy combined with ESG-linked executive compensation can make the presence of women on boards indifferent, if firms have high levels of board independence, CEO non-duality and a CSR Sustainability Committee. The results also show that a high ESG scores can be achieved with a combination of board-management mechanisms, which does not include executive alignment incentives, thereby contributing to the debate on whether monitoring and executive alignment incentives act as substitutes or complements. In addition, the results reinforce the notion that CSR Sustainability Committees are important, but should be combined with other conditions to be effective.

Aligning to Improve Pediatric Health Care Quality.

Measures that focus attention on populations who experience disparities in health outcomes– including high-risk pediatric groups - are critically important to ensure quality and equity in evidence-based care. As part of the AHRQ-CMS Pediatric Quality Measures Program, 2 grantees developed validated quality measures for state Medicaid/Children's Health Insurance Program agencies, health plans and providers to support better care for 2 highly vulnerable but small populations. Our efforts highlight the need for aligned incentives at multiple levels to drive quality improvement.

Rivals without a cause? Relative performance feedback creates destructive competition despite aligned incentives

AbstractWhether people compete or cooperate with each other has consequences for their own performance and that of organizations. To explain why people compete or cooperate, previous research has focused on two main factors: situational outcome structures and personality types. Here, we propose that—above and beyond these two factors—situational cues, such as the format in which people receive feedback, strongly affect whether they act competitively, cooperatively, or individualistically. Results of a laboratory experiment support our theorizing: After receiving ranking feedback, both students and experienced managers treated group situations with cooperative outcome structures as competitive and were in consequence willing to forgo guaranteed financial gains to pursue a—financially irrelevant—better rank. Conversely, in dilemma situations, feedback based on the joint group outcome led to more cooperation than ranking feedback. Our study contributes to research on competition, cooperation, interdependence theory, forced ranking, and the design of information environments.

Equity incentive and risk taking: evidence from China

PurposeChina has formally implemented equity incentive for more than 10 years; thus, a considerable number of equity incentive programs has entered the exercise period. This means that it is time to conduct a comprehensive analysis of the incentive effects of equity incentive throughout the whole implementation phase. The purpose of this paper is to examine the relationship between equity incentive, enterprise’s risk taking and risk decisions in China.Design/methodology/approachUsing sensitivity of executives’ wealth and stock price (Delta) to measure the alignment effect and using sensitivity of executives’ wealth and stock return volatility (Vega) to measure the risk-taking effect, this paper aims to empirically test the relation of equity incentive and enterprise’s risk taking and risk decisions.FindingsThe authors find that Vega is positively related to risk taking; however, this improvement was mainly reflected in the private enterprises rather than state-owned enterprises. In terms of corporate policy choice, the authors find that Vega is positively related to firm focus and leverage. But, they have not found that Vega can promote R&D investment.Originality/valueExisting studies have mostly concerned about the executives’ opportunistic behavior; however, analyses of the positive effect of equity incentive are limited. The authors use a combination of risk-taking incentives and alignment incentives to test the relationship between equity incentive and risk taking.

What U.S. emergency care value transformation can learn from Canadian efforts to improve emergency department throughput.

What U.S. emergency care value transformation can learn from Canadian efforts to improve emergency department throughput.

Managers with Blank Checks: The Agency Problems of Corporate Philanthropy

Agency theory and profit maximization theory offer competing views on corporate philanthropic activities. Using hand-collected data, I evaluate these theories and find evidence more consistent with the agency theory. CEOs’ relation with nonprofit institutions, weaker alignment incentives of managers and weaker governance structure increase the likelihood and amount of corporate giving in general and foundation giving (which is a more stable source of donations) in particular. To analyze whether private benefits of corporate giving are optimally factored into CEO compensation, I develop an instrumental variable framework to address the direction of relation between compensation and firm donations. By using natural disasters as an instrument of corporate giving, I find that CEOs use firm donations to insulate their compensation particularly by supporting causes related to directors’ interests. Results also show that corporate giving reduces stock returns by lowering the marginal dollar value of cash. Lastly, negative stock price reaction to the news of unexpected firm donations further confirms the agency theory of corporate giving.

The Tradeoff Between Employee Ownership and CEO Compensation: Evidence from Defined Contribution Pension Plans

This paper examines the executive compensation schemes of firms whose employees invest in company stocks in the defined contribution (DC) pension plan. In sum, I find that during the period 1992 to 2007, firms with higher employee ownership in the DC plan are more likely to reduce the level and fraction of CEO pay in the form of stock options. The CEO interest alignment (Delta) and risk-taking incentives (Vega) are significantly suppressed in these firms. Moreover, these results are more evident for subsamples of firms in more unionized industries, firms whose employees are more difficult to retain, firms with weaker free-riding problems among employees, and firms that adopt broad-based employee stock ownership plans. The results are also more pronounced for a subsample of firms with higher capital intensity. These findings suggest that employee ownership in the DC plan enhances the mutual monitoring of and coordination among rank-and-file employees, thereby reducing the demand for intensive managerial monitoring induced by high-powered CEO stock option. These findings also indicate that when employees bear large amounts of undiversified risk by holding employer stocks in the DC plan, firms tend to lower managerial risk-taking incentives so as to avoid costly labor costs and litigations.

Incentivizing managers to build innovative firms

We investigate whether the equity-linked components of top executive pay have an effect on patenting activity within a firm. We find a positive relationship between firm patenting activity and managerial alignment incentives created by stock and stock option grants. Prior work has shown that the market value of a firm reflects the value of its patents. Thus, our finding suggests innovation is one such channel through which equity alignment incentives positively impact firm value. On the other hand, we find that the risk-taking incentive from stock options does not increase patenting.

Incentivizing Managers to Build Innovative Firms

We investigate whether the equity-linked components of top executive pay have an effect on patenting activity within a firm. We find a positive relationship between firm patenting activity and managerial alignment incentives created by stock and stock option grants. Prior work has shown that the market value of a firm reflects the value of its patents. Thus, our finding suggests innovation is one such channel through which equity alignment incentives positively impact firm value. On the other hand, we find that the risk-taking incentive from stock options does not increase patenting.

NHS culture depends on enlightened leadership and aligned incentives

The recent article on ‘What the NHS needs to improve’ (JRSM 2008;101:7–11)1 identifies four valuable ingredients of a good culture but omits what is needed to achieve it. As a professor of comparative health care systems who has worked closely with many parts of the NHS since the Thatcher reforms, I think the answers are most clearly found in the transformation of the US Veterans Health Administration from a public, politicized system considerably worse than the NHS in the early 1990s to one considerably better that outperforms even the great medical centres. The key elements are a coherent master plan for patient-centred care that rewards quality and value for money, a strong and steady leadership to implement the plan at every level from regional to individual service design, the elimination of perverse incentives, and the construction of aligned incentives at every level. Most of the costly and extensive reforms of the NHS I have witnessed since 1990 have been half-baked and partially contrary to the previous ones so that an accretion of crosscutting changes has developed. Powerful, perverse and non-aligned incentives undermine the development of cost-effective, integrated services. Leaders keep changing, and each new one asserts his or her presence by correcting or reversing previous initiatives and instigating new ones. Current initiatives – such as ‘payment by results’, which has nothing to do with payment by results but rather payment by activity – build in perverse incentives that will distort services in new ways. Until the economics and organisation of services support cost-effective, integrated services of quality for patients, a culture of Confidence, Compassion, Connectedness and Curiosity will not happen.

Rank Order Tournaments and Incentive Alignment: The Effect on Firm Performance

In this article, we study the effectiveness of promotion-based tournament incentives. We simultaneously investigate tournament incentives for the VP and performance- or equity- based (alignment) incentives for the VP and the CEO. We find that tournament incentives, as measured by the pay differential between the CEO and VPs, relate positively to firm performance. We show that the effect of tournament incentives on firm performance is weaker when the firm has a new CEO and more so when the new CEO is an outsider, and when the firm belongs to a homogeneous industry. On the other hand, tournament effects are stronger when the CEO is close to retirement. Our analysis is robust to corrections for endogeneity of all our incentive measures as well for several alternate measures of tournament incentives and firm performance.

Wintel: Cooperation and Conflict

We study competitive interactions between Intel and Microsoft, two producers of complementary products. In a system of complements, like the PC, the value of the final product depends on how well the different components work together. This, in turn, depends on the firms’ investment in complementary R&D. We ask whether Intel and Microsoft will want to cooperate and make the final product as valuable as possible. Contrary to the popular view that two tight complements will generally have well aligned incentives, we demonstrate that natural conflicts emerge over pricing, the timing of new product releases, and who captures the greatest value at different phases of product generations.

Mechanisms for enhancing the credibility of an adviser: prepayment and aligned incentives

AbstractWe tested the effectiveness of prepayment for advice and aligned incentives as mechanisms for enhancing trust in unfamiliar advisers in decision‐making under uncertainty. Participants were low‐income Zimbabweans who played two rounds of the Monty Hall three‐door game. In round 1, participants who purchased advice were significantly more likely to follow advice for how to win the game than were participants who received free advice. In round 2, the apparent effectiveness of advisers' suggestions in round 1 moderated participants' propensity to follow advice. If the round 1 advice appeared wrong, the credibility enhancing benefits of prepayment diminished. If the advice appeared right, the benefits of prepayment maintained. Hypotheses with regard to the benefits of aligned incentives received only weak support. Copyright © 2006 John Wiley & Sons, Ltd.

Mechanisms for Enhancing the Credibility of an Adviser: Prepayment and Aligned Incentives

We tested the effectiveness of prepayment for advice and aligned incentives as mechanisms for enhancing trust in unfamiliar advisers in decision-making under uncertainty. Participants were low-income Zimbabweans who played two rounds of the Monty Hall three-door game. In round 1, participants who purchased advice were significantly more likely to follow advice for how to win the game than were participants who received free advice. In round 2, the apparent effectiveness of advisers' suggestions in round 1 moderated participants' propensity to follow advice. If the round 1 advice appeared wrong, the credibility enhancing benefits of prepayment diminished. If the advice appeared right, the benefits of prepayment maintained. Hypotheses with regard to the benefits of aligned incentives received only weak support.

The association between bank performance, board independence, and CEO pay‐performance sensitivity

Outlines previous research on the links between board composition, firm performance and chief executive officer (CEO) compensation, and presents a study of CEO pay‐performance sensitivity, board independence and performance in the US banking industry. Explains the methodology and presents the results, suggesting that for large bank holding companies with average performance, increased board independence reduces pay‐performance sensitivity because internal monitoring is sufficient without extra alignment incentives. Adds that when performance is poor this no longer holds true and compensation contracts are then used to align the interests of managers and shareholders.