Compensation Structures Research Articles

Seven Things to Know Before Hiring a Financial Planner

What are the most important things to look for when hiring a new financial advisor or reviewing your current one? Are they unbiased? Do they have the ability to meet your current and future needs? What is their specialization? From compensation structures to disciplinary history, these seven questions should be in your back pocket when interviewing your next advisor.

Worker's Compensation Injury and Illness Care: A Global Round Table.

Work-related injuries and diseases have a significant impact on workers and their families, society, and the economy. There is a gap in the literature regarding the structures, content, quality, and outcomes of international occupational health systems serving injured and ill workers. This global round table was an attempt to elucidate, evaluate, and identify areas needing improvement. International occupational health professionals were identified via chain/snowball sampling and asked to answer five questions designed to evaluate the structures, processes, and outcomes of the workers' compensation systems in each country. Areas for improvement identified during this round table included timely access, reducing the impact of liability and eligibility determinations on access to medical care, equitable access to care, and the accuracy of reporting. Canada had successfully utilized a virtual approach to care for the geographically remote worker. International workers' compensation structures are designed to ensure timely access to quality care and services. Financial incentives optimize the safety of the working environment. There remain areas for improvement. Resources are limited, especially within the public health systems, which may delay care and affect quality. Informal and remote workers often do not have the same access to care. Occupational Health Services (OHS) and national reporting databases exist throughout the world but may not accurately capture data on informal, self-employed, small business, migrant, and remote workers.

Baldia Factory Fire Tragedy: A Black Spot for Workplace Safety Standards in Pakistan.

The Baldia Factory (BF) fire incident in Pakistan was among the most tragic workplace fires in the world claiming the lives of more than 259 people. A case study was conducted to evaluate the state of the safety measures, firefighting systems, building regulations, employees' documentation, and compensation structures. The case study found many deficiencies in the fire safety program and lack of adherence to and enforcement of existing fire regulations. Findings are discussed in the context of fire safety regulations and enforcement in low- and middle-income countries such as Pakistan.

Board Structure, CEO Equity-Based Compensation, and Financial Performance: Evidence from MENA Countries

This paper investigates the association between board of director (BOD) structures and CEO equity-based compensation (long-term incentive) for commercial banks (conventional and Islamic banks) in MENA countries. Specifically, we take board size and board independence to measure the board structure. Furthermore, we investigate the influence of board structure on the association between CEO equity-based compensation and financial performance. Moreover, we compare conventional and Islamic banks in testing these relationships. Using a sample of 65 banks in MENA countries for the period between 2009 and 2020, we show a significant positive association between board size and CEO compensation. However, we find the same association between these variables for IBs, but the effect of board size on CEO compensation is less. We also show that board independence is negatively correlated with CEO compensation. Nevertheless, the relationship between board independence and CEO ownership is positive for IBs. For the moderating test, we find that effective board structure provides more incentives to the CEO, leading them to achieve higher financial performance. The Islamic bank’s business model (based on Shari’ah principles) contributes to the different influences of board structure on CEO compensation. Our results provide the insight that a strong and effective board is important for managing the executive’s compensation system. The findings of this study have implications for financial firms, policymakers, and regulators. Specifically, the study may help in understanding the benefits of different compensation structures relative to different types of financial firms.

The impact of legal systems on CEO compensation and bank stability: a cross-country study

PurposeRemuneration policies may differ from country to country, and their effect on bank stability could be due to the legal framework. Therefore, this study aims to investigate how the legal system impacts the relationship between CEO compensation and bank stability across countries.Design/methodology/approachTo test the study hypotheses, the authors use panel data of 74 banks operating in ten OECD countries during the period 2009–2016 and apply the generalized moments method regression model to better remediate the endogeneity problem.FindingsThe findings confirm that a country’s banking regulations significantly affect its bank stability. Common law countries have less bank stability than civil law countries. This result can be interpreted by the fact that, in common-law countries, banks’ CEO are strongly protected by the law, so they allocate a large part of bank assets to risky loans to improve their variable remuneration.Practical implicationsThe research can help policymakers understand bank stability in one country. Any legal reform would require prior knowledge of how risk-taking may arise in executive compensation.Originality/valueThe contribution is to explain the controversial effect of executive compensation on bank stability in the framework of legal theory. The authors argue that regulators should monitor compensation structures and that the country’s legal origin of law shapes the CEO compensation structure and is a determinant of bank stability. To the best of the authors’ knowledge, there are no studies exploring this field. So, this study tries to shed more light on the dark side of CEOs’ behavior when undertaking risky projects to maximize their remuneration.

Influence of Supervision on Employee Retention in Public Universities in Central Rift Valley Region of Kenya.

The Public Universities are navigating an increasingly competitive landscape, necessitating the retention of key employees to secure and maintain a competitive edge. Globalization and innovative management practices have intensified competition for public universities, both locally and internationally. Critical human resource management practices such as promotion, training and development, remuneration, and employee supervision directly influence employee perceptions of their organization. This study aims to explore the impact of supervision on employee retention, grounded in expectancy theory. Utilizing a descriptive research design, the study targeted a population of 2,462 individuals, including teaching, administrative, and support staff. A sample of 217 respondents was selected through purposive, stratified, and simple random sampling techniques. The reliability of the research instruments was assessed using Cronbach’s alpha and a coefficient score of 0.87 was obtained indicating high reliability. Primary data was collected via questionnaires. Data analysis was performed using the Statistical Package for the Social Sciences (SPSS), employing both descriptive and inferential statistics. Descriptive statistics were presented through frequencies, means, standard deviations, and percentages in tables and charts, while inferential statistics included Pearson’s correlation analysis and both simple and multiple regression analysis, with hypotheses tested at a 5% significance level. Results from the Pearson’s correlation analysis indicated a significant positive relationship between employee supervision and retention (p < 0.05). Regression analysis confirmed that supervision significantly influences employee retention (p < 0.05). Consequently, the study recommends that universities develop and implement effective supervisory support guidelines. Future research could explore the role of other factors such as compensation structures, institutional culture or career development opportunities in influencing employee retention, particularly in different types of academic institutions or in other geographical regions.

Analysis of corporate governance and corporate sustainability performance in China

This study examines the relationship between corporate governance (CG) and corporate sustainability performance (CSP) in Chinese A-share listed corporations from 2016 to 2022. Using regression analysis, it explores how board attributes, executive incentives, and equity structure influence economic, environmental, and social sustainability performance. The findings show that while board attributes positively impact economic sustainability, their effects on environmental and social sustainability are mixed. Executive incentives strongly correlate with all sustainability dimensions, emphasizing the importance of aligning compensation structures with sustainability goals. Concentrated ownership positively affects economic performance but may hinder environmental sustainability. However, it marginally contributes to social sustainability. This research sheds light on the interplay between CG and CSP in China, offering insights for policymakers and corporate leaders aiming to enhance sustainability practices.

Does institutional holders’ approval really matter? An examination of Israel’s binding vote on CEO compensation, from directors’ point of view

This study examines the implications of mandatory shareholder approval for chief executive officer (CEO) compensation in Israel, following the “say-on-pay” (SOP) framework. Through the utilization of a binding voting framework, shareholders evaluate the effectiveness of CEO compensation structures. A survey involving 106 Israeli directors occupying diverse board positions, including external, independent, regular, and chair positions, reveals that external directors demonstrate a greater appreciation for institutional votes. This highlights their acknowledgment of institutional perspectives and underscores the critical significance of fostering effective communication between boards and institutional stakeholders to strengthen corporate governance frameworks. The study emphasizes the pivotal role of dialogue in enhancing governance structures through a nuanced examination of challenges in executive compensation governance

On the Intersection of Expropriation, Compensation, and Ownership Structures in a Developing Economy

This research aims to investigate the impact of related party transactions, executive compensation & ownership structure on firm performance and value. The research includes all registered firms in the KSE 100 index. The time frame of this study is 7 years (2016-2022). Through empirical findings, it is proved that the related party transactions, executive compensation & structure of ownership have a significant influence on the performance and value of the firm. The study finds a positive impact of financial RPTs and related party purchases on both the profitability and value of firms. Lastly, the study indicates that ownership of banks, financial institutions, and associated companies has a positive influence on performance as well as on the value of firms. The theoretical implications of this study are two-fold. Firstly, this study represents a unique perspective on a comprehensive analysis of sub-categories of related party transactions, which allows for specific identification of types of related party transactions that have an impact on either profitability or value. Secondly, the three-pronged approach is unique to this study- it allows an opportunity to determine which other factors within the environment affect value and profitability at the same time.

Climate Change, Compensation and Unpredictable or Uninsurable Loss: A Possible Path Forward Using Compensation Funds

Abstract Climate change has created existential challenges for current models of natural hazard insurance, and it may be difficult going forward for these models to consistently, fairly and coherently manage the compensation challenges associated with climate change impacts in Europe. This paper analyses the application of a comprehensive no-fault compensation fund framework to the problem of presently uninsured and technically uninsurable losses that are currently inadequately covered by other compensation mechanisms, and for which compensation may be difficult to recover using tort law mechanisms. The proposed structure includes consideration of the purpose and form of the fund, eligibility and categories of loss covered, quantum of compensation, and funding sources. There is also a preliminary consideration of the impact of such a fund on questions of liability. The proposed model illustrates potential ways for a compensation fund to support and complement existing compensation structures such as insurance and civil liability, and provide the necessary stabilisation in European society. Further legal research in this area will require qualitative and quantitative empirical data on how existing compensation frameworks (including innovative insurance instruments like parametric insurance) have so far positively and negatively impacted the ability of victims of climate change to prepare for and recover from loss incidents, in comparison with tort law and existing insurance.

Sales‐based compensation and collusion with heterogeneous firms

AbstractPricing and output decisions are often delegated to managers compensated on the basis of sales. Prior literature has shown that when firms are homogeneous, the delegation of pricing or output decisions to managers, compensated on the basis of sales, does not facilitate collusion. We show that when firms are heterogeneous, either in marginal cost or product quality, sales‐based compensation can facilitate collusion under both price and quantity competition. As a result, compensating managers on the basis of sales can increase firm profits and reduce consumer welfare. Additionally, we find that owners can strategically design managerial compensation structures to incentivize collusion between rival managers.

Exploring Human Resource Management Alternatives: A Comprehensive Evaluation

This paper seeks to examine HRM practices in India, taking into consideration the underlying cultural, political, and economic influences. The research is structured into three primary sections. The first section explores the concept of HRM within the context of India's social environment. The second section outlines the methodology and presents the data analysis. The third section delves into the results, offering insights into HRM practices within Indian organizations. The research outcomes presented in the paper provide insights into the principal HRM functions within the Indian public sector. Staffing practices are characterized by a prominent reliance on networking, entitlement, adherence to Islamic/revolutionary criteria, and a strong emphasis on job security. Compensation structures feature fixed pay, rewards linked to ascription/seniority, and a hierarchical pay system. Training and development programs are observed to be largely ad hoc and unplanned. Lastly, the appraisal function receives limited attention and relies predominantly on subjective and behavioral criteria. Given that TOPSIS is not well-suited for directly handling this type of data, we have introduced an innovative approach known as "TOPSIS for Algorithm Ranking," abbreviated as TOPSIS-AR. In this approach, algorithms are treated as alternatives, while benchmarks are considered as criteria. To assess the alternatives based on the criteria, we represent their ratings using a decision matrix that incorporates mean values and standard deviations.To demonstrate the applicability of this method, we present a case study involving evolutionary algorithms. The simulation results from this study validate the effectiveness of TOPSIS-AR in determining the ranking of the evaluated algorithms. The paper acknowledges certain limitations in its study related to HRM functions, the sector under examination, and the sample size. Future research endeavors could extend the analysis by comparing HRM practices between large/state-owned and small/private organizations. These insights could prove valuable to a diverse range of stakeholders, including Multinational Enterprises (MNEs), Non-Governmental Organizations (NGOs), international negotiators, expatriate managers, investors, and anyone with an interest in this geographical region. The paper offers a practical and convenient approach for evaluating HRM variations. By combining both qualitative and quantitative data, it provides a comprehensive understanding of HRM practices, supplemented by secondary data and previous research findings. Given the potential similarities between India and other developing countries, the outcomes of this study might be particularly relevant for comparative research aimed at examining the transferability of management practices across different contexts.

Does CEO Power Affect the Relations between CEO Compensation and Risk-Taking?

Purpose - This study investigates the effect of incentive compensation and CEO power on a firm’s risk-taking behavior, leveraging stock return volatility and earnings volatility as the key indicators of risk-taking.
 Design/Methodology/Approach - A comprehensive analysis is conducted using data from 1,958 U.S. firms over a 28-year period (1992- 2019). The study employ both ordinary least square (OLS) regression and two-stage least square (2SLS) regression for analysis. Pay-volatility sensitivity (PVS) and CEO-pay slice (CPS) are used as proxies for incentive compensation and CEO power, respectively.
 Findings - The findings offer solid empirical proof that PVS and CPS have a negative influence on both earnings volatility and stock return volatility. Furthermore, the detrimental effect of PVS on managerial risk-taking is significantly more pronounced for CEOs with lower CPS compared with those with higher CPS. While incentive compensation appears to deter CEOs from embracing higher risks, CEOs with more power are less risk-averse when offered incentive compensation compared to their less powerful counterparts.
 Research Implications - This study significantly contributes to existing literature by revealing the interactive effects between CEO power and incentive compensation on a firm’s risk-taking behavior. Understanding these dynamics is pivotal as it offers a nuanced view of how CEO compensation structures and power hierarchies within a firm influence its risk-taking propensity, which is critical for both firm performance and broader financial stability considerations. The insights derived from this analysis can inform more balanced executive compensation structures and governance models that ensure an optimal level of risk-taking.

Integrating Corporate Governance Practices into New Financing Projects and Executive Pay Structures

Purpose: This study aims to explore the integration of corporate governance practices into new financing projects and executive pay structures, highlighting their impact on organizational performance, transparency, and stakeholder trust. It addresses the growing need for robust governance mechanisms to align executive incentives with long-term value creation and effective decision-making in financing projects. Research Design and Methodology: A quantitative descriptive research design was employed, utilizing survey instruments, statistical analysis, and regression modeling to examine the integration of governance practices across diverse corporations. The study focused on the prevalence, determinants, and outcomes of governance integration in financing projects and executive compensation structures. Findings and Discussion: The findings reveal that robust corporate governance mechanisms significantly influence firms' financing decisions and executive compensation structures. Effective governance practices enhance transparency, accountability, and risk management, leading to lower financing costs, greater investor confidence, and improved project outcomes. The study also highlights the role of performance-based executive compensation schemes in aligning executive incentives with shareholder interests, fostering long-term value creation. Implications: The research underscores the importance of integrating corporate governance practices into financing and compensation frameworks to enhance organizational performance and stakeholder trust. It offers practical insights for policymakers, practitioners, and scholars on developing governance mechanisms that ensure prudent decision-making and value optimization. The findings advocate for continuous improvement in governance practices to meet evolving regulatory, shareholder, and societal expectations.

Do CEO risk-reducing incentives affect operating leverage? Evidence from CEO inside debt holdings

Purpose The purpose of this paper is to investigate the relationship between CEOs' inside debt holdings (pension benefits and deferred compensation) and the operating leverage of the firms they manage, with the aim to examine whether CEO incentives play a role in corporate risk-taking. Design/methodology/approach The authors investigate the relation between CEO inside debt holdings (CIDH) (pension benefits and deferred compensation) and the operating leverage (DOL) of the firms they manage. Using a sample of 11,145 US firm-year observations over the period 2006–2017, the authors find a strong negative association between CIDH and DOL. Additional analyses reveal that the relationship between CIDH and DOL is more pronounced in firms with heightened agency issues, powerful CEOs and for CEOs with stronger professional networks. The results are robust to various sensitivity and endogeneity tests. Findings The authors find strong evidence confirming the expected negative association between CEO inside debt and DOL suggesting that firms with higher inside debt tend to maintain lower levels of operating leverage. These findings continue to hold with the alternative measure for the inside debt and operating leverage, and across a range of tests designed to rule out the possibility that the primary findings are in any way driven by potential endogeneity. In addition, the findings demonstrate that the presence of manager-shareholder agency conflicts can strengthen the inside debt–DOL relationship suggesting the strong role of inside debt in reducing firm risk. Research limitations/implications Findings in this paper have implications for design of compensation structures so that corporate boards can establish incentives as a tool for risk management. A limitation of this study is that it is focused on one market, i.e. US listed companies, so the findings may not be applicable on a global scale. Originality/value To the best of the authors’ knowledge, this is the first study that links firm-level management of operating leverage through design of CEO inside debt incentives (two obvious choices for risk-reduction at the CEOs’ disposal include reducing financial risk through reduction of firm leverage and reducing operating risk through reduction of operating leverage). While use of firm leverage as an instrument of choice has been explored in the past, use of operating leverage to achieve risk reduction when CEO possess high inside holding, has received very little attention.

Frontline workers' performance in prosocial tasks: evidence from a Lab-in-the-Field in Western India

PurposeFrontline workers (FLWs) constitute a critical part of the implementation cadre within public policies, serving a significant role in the last-mile delivery of public goods and services. FLWs under public programs in low and middle-income countries like India are offered different compensation structures that range from full-time salaries, piece rate honorariums, contractual engagements, to no remuneration. Whilst the rationale for offering different compensations vary, are certain structures more successful in encouraging FLWs to perform a prosocial task? Further, can certain structures encourage FLWs to perform beyond the incentivized policy mandate?Design/methodology/approachInvestigating workers' prosocial effort within policy implementation, the authors conducted a randomized lab-in-the-field inquiry with 344 Anganwadi-based workers (workers under the nutrition policy) in western India. These FLWs were engaged to perform a novel real-effort task that was tied to different incentive structures and their performance was adjudged based on measurable quantity, effort and quality parameters.FindingsResults demonstrate that uncompensated workers invest the greatest amount of effort whilst compromising on task quality, and vice-versa for subjects receiving pay-for-performance compensation. Programs must account for policy focus when offering compensations: volunteer engagement may be counterproductive for quality focus and to the adherence to ancillary task mandates like nature/quality of beneficiary interaction. On the other hand, the distribution of products (like health goods) can rely on volunteer effort.Originality/valueThe study brings together various compensation schemes operating at the field level, under one study using an LFE methodology within the context of policy implementation in India.

THE INFLUENCE OF ORGANIZATIONAL CLIMATE, COMPENSATION AND COMPETENCE ON EMPLOYEE PRODUCTIVITY PT. JISS INDONESIA SEJAHTERA JAKARTA AREA

In the current business landscape, organizations recognize that their success and sustainability are intricately tied to the performance and productivity of their employees. As such, numerous factors contribute to shaping employee productivity, including the organizational climate, compensation structures, and employee competence. This study aims to determine the effect of organizational climate, compensation and competence on the work productivity of employees of PT JISS Indonesia Sejahtera Jakarta area. This study was conducted for 3 months from June 2023 to August 2023. The research method used is the survey method with a sample size of 195 respondents chosen from a population of 382 employees through the application of the Slovin formula. All data were collected as primary data and processed utilizing SPSS version 26.0, followed by data analysis encompassing tests to validate the classical assumptions. Multicollinearity tests demonstrated tolerances and VIF values falling within acceptable ranges, thus confirming the absence of multicollinearity. The heteroscedasticity test indicated homoscedasticity for the variables. Multiple linear regression revealed a model linking organizational climate, compensation, and competence to work productivity. Hypothesis tests indicated that the combined influence of these factors was statistically significant, with t-tests confirming individual positive influences. The coefficient of determination indicated that 72.8% of work productivity variability can be attributed to organizational climate, compensation, and competence, while the remaining 27.2% is influenced by unexamined variables.

Compensation Pathways for Utility Accommodation on Public Rights of Way

There are various degrees of authority given to accommodate utilities on public rights of way (ROW). In the USA, most state laws permit public-serving utilities to use road ROW so long as they are not obstructing or hindering travel, endangering public safety, or obstructing other utilities from using the ROW legally. State laws and regulations specify different fee structures. In some states, the Department of Transportation (DOT) is authorized to assess fees or enter into lease agreements for utility accommodations on ROW. State DOTs may also receive compensation in some cases through in-kind resource sharing, barter arrangements, or other means. Different strategies may result in different fee schedules, which may or may not generate revenue for the state DOT. State DOTs are currently implementing various practices and compensation structures for utilities installed on public ROWs. This research aims to develop a categorization mechanism framework to determine how state DOTs compensate and evaluate utilities installed on ROWs. The framework is presented to assist DOTs in valuing and compensating for utilities and provides state DOTs with the means and approaches needed to execute a fee or leasing schedule for utility installations in public ROW. Several methods were used to accomplish this objective, including literature reviews, synthesis of legislation and policies, and interviews with subject matter experts. As a result, this investigation found significant variation between states in how they approach compensation and value utility accommodations. Based on this paper’s findings, valuation and compensation standardization are urgently needed.

Influential independent directors' reputation incentives: Impacts on CEO compensation contracts and financial reporting

We study how reputation incentives of influential independent directors (those holding multiple directorships) affect CEO compensation and firm financial reporting decisions. We find that CEO equity-based incentives, measured by CEO delta, vega and the number of equity grants are positively related to these directors' reputation incentives. These director reputation incentives also mitigate the perverse CEO incentives to inflate earnings, which arise from such high-powered compensation structures, by motivating increased board monitoring to limit discretionary accruals and real activity-based earnings management. These findings are invariant to endogeneity adjustments under multiple approaches, including exogenous changes in reputation incentives.

Ride-Hailing Networks with Strategic Drivers: The Impact of Platform Control Capabilities on Performance

Problem definition: Motivated by ride-hailing platforms such as Uber, Lyft and Didi, we study the problem of matching riders with self-interested drivers over a spatial network. We focus on the performance impact of two operational platform controls—demand-side admission control and supply-side repositioning control—considering the interplay with two practically important challenges: (i) spatial demand imbalances prevail for extended periods of time; and (ii) self-interested drivers strategically decide whether to join the network, and, if so, whether to reposition when not serving riders. Methodology/results: We develop and analyze the steady-state behavior of a novel game-theoretic fluid model of a two-location, four-route loss network. First, we fully characterize and compare the steady-state system equilibria under three control regimes, from minimal control to centralized control. Second, we provide insights on how and why platform control impacts equilibrium performance, notably with new findings on the role of admission control: the platform may find it optimal to strategically reject demand at the low-demand location even if drivers are in excess supply, to induce repositioning to the high-demand location. We provide necessary and sufficient conditions for this policy. Third, we derive upper bounds on the platform’s and drivers’ benefits caused by increased platform control; these are more significant under moderate capacity and significant cross-location demand imbalance. Managerial implications: Our results contribute important guidelines on the optimal operations of ride-hailing networks. Our model can also inform the design of driver compensation structures that support more centralized network control. Supplemental Material: The e-companion and Supplemental Material are available at https://doi.org/10.1287/msom.2023.1221 .