Long-term Incentives Research Articles

Protecting nutrition in a food crisis.

Food insecurity and malnutrition are rising worldwide due to disruptions in food systems related to interconnected health-, climate- and conflict-related crises. Although governments globally are committed to addressing nutritional challenges, policy responses have increasingly focused on food security and, particularly, on food affordability. However, these short-term measures often overlook the necessity of integrating nutritious foods into the food system to ensure improved long-term nutrition. By drawing on the United Nations Committee on World Food Security's Voluntary guidelines on food systems and nutrition, this article outlines opportunities for policy-makers to integrate nutrition into key elements of the crisis response. Key policy areas where nutrition could be further integrated include social protection, agricultural investment, trade policy and urban planning. Strengthening the focus of nutrition in these measures will be essential to establish long-term incentives that support food systems transformation for improved nutrition. Drawing on theories of the policy process, I propose that stronger governance and cross-sectoral dialogue will be critical to achieve sustained nutritional outcomes. Health policy-makers can play a leadership role in supporting cross-sectoral policy change by carefully framing the policy issues, advocating for institutional structures that promote collaboration across sectors to prioritize nutrition, and strengthening the management of conflicts of interest in food system policy-making.

CEO performance targets: The impact of Big 4 accounting firms versus other compensation consultants

Using a sample of ASX 500 firms over the 2005–2019 period, we document substantial variation in the use of performance targets within Chief Executive Officer (CEO) compensation contracts, contrasting firms advised by Big 4 accounting entities with other compensation consulting firms. Firms that engage a Big 4 accounting firm are more likely to implement explicit non-financial performance targets within the short-term incentive plan, effectively minimising opportunities for post hoc justification. They also favour the incorporation of relative performance targets that mitigate pay for luck in the long-term incentive plan. Firms that engage a Big 4 accounting firm demonstrate a similar pay-for-performance relation to firms that do not engage a compensation consultant, while firms engaging non-Big 4 consultants exhibit a lower pay-for-performance relation. Our findings suggest that Big 4 accounting firms provide compensation recommendations that encourage the alignment of interests between managers and shareholders. JEL Classification: J33, M12, M52, L25

Markets and Public Goods: Integrity, Trust, and Climate Change

Public goods are an anomaly in neoclassical economics, a form of ‘market failure’. They exist outside the efficient and equitable optimality of market exchange. It can be shown however that competitive markets are only efficient in short product cycles. Long-term objectives require social support. Corruption arises from the consequent private public interaction. Integrity, the absence of corruption, is a public good. Corruption has risen since the 1980s with privatization and outsourcing. How did European governments become honest in the first place? In the century after the 1770s, they moved from regarding public office as a form of private property to a conception of serving the public good. This integrity revolution was facilitated by Weberian bureaucracies, selected by academic merit and committed to impartiality by long-term incentives. The neoliberal revolution of the 1980s regarded bureaucracies as obstructive and slow. It admired the business corporation with its opaque procedures and charismatic leadership. Concurrently economics moved from neoclassical harmony theory to an asymmetric information model of ‘opportunism with guile’, providing doctrinal legitimacy for corruption. Corporate advertising is deliberately deceptive, and undermines the public good of trustworthiness. Digital platforms, powered by advertising, have subverted public discourse. Misinformation and disinformation have become prime risk factors for current societies. The practical operation of markets undermines the public goods of integrity and trustworthiness. The public good of a habitable climate cannot be achieved by market methods. For long-term payoffs, ‘free markets’ are a harmful delusion, inefficient, corrupt, impossible to achieve, and not sustainable.

Long-Term Incentives to Innovate: Top Down or Bottom Up?

Long-Term Incentives to Innovate: Top Down or Bottom Up?

Do green and low-carbon development policies affect carbon markets? Evidence from China

ABSTRACT Responses of carbon prices to emission reduction policies can imply the market incentive effect of certain policies and effectiveness of carbon markets. The article collects 51 policy events related to green and low-carbon development implemented by the Chinese government from December 2013 to December 2023. Applying the event study method, it discusses the short-term reaction of carbon prices in China’s regional carbon markets to individual events, classified events, and events as a whole. In addition, five diplomatic statements of the Chinese government in multilateral climate governance process are selected, and a panel regression model is constructed to analyse the long-term reaction of carbon prices to each statement. The results are as follows: First, statements of the Chinese government in climate diplomacy have long-term incentive effect on carbon markets. Second, China’s green and low-carbon development policies have brought significant market incentives overall. Among the national, regional and industrial policies, the national and industrial policies have the most significant positive influence on carbon prices in the short term. Third, Hubei, Fujian and Shenzhen carbon markets are more effective. China should actively participate in multilateral climate diplomacy and climate governance, establish a more detailed low-carbon policy system, and improve the scale and activity of carbon markets.

Application and Practice of Innovative Talent Incentive System in Research Units

This study combines the actual situation of research units to carry out trial tests of salary reform, focusing on the calculation of outstanding innovative talents, staff, supervisors, and other talents at all levels. It continuously optimizes the talent incentive mechanism of our institute. Combining with the broadband job level system, it establishes a dual-line assessment and incentive mechanism of "position + innovation", implements mechanisms such as "revealing the best" leadership, rewards for major innovative achievements, medium- and long-term incentives, etc., strengthens the incentive for scientific research work, and continuously stimulates intrinsic innovation motivation.

Executive Incentives and Corporate Risk Taking

Risk-taking is a fundamental driving force for long-term sustainable economic growth, can corporate risk-taking be enhanced through executive incentives and how to adjust the level of corporate risk-taking? This paper utilizes data from 1886 Shanghai and Shenzhen A-share listed companies from 2010 to 2021, and conducts an empirical analysis by using fixed-effects model panel regression. This paper compares the effects of compensation incentives, equity incentives, and the simultaneous implementation of both incentives on the level of corporate risk-taking, and finds that equity incentives, as a long-term incentive, can significantly enhance corporate risk-taking compared to compensation incentives and the simultaneous implementation of both incentives. Further analysis reveals that equity incentives increase risk-taking by affecting selling expenses, but have no significant effect on administrative expenses and operating costs. Therefore, effective incentives can bring real benefits and create substantial value for enterprises. This paper provides a theoretical reference for the strategic planning and sustainable development of listed companies.

Analysis of the Impact of Equity Incentives on Corporate Performance

Equity incentive is a long-term incentive mechanism implemented by enterprises to motivate and retain core talents, and is one of the most commonly used methods to motivate employees. Equity incentives have been developed from the beginning of the twentieth century to the present day to form a relatively complete and mature system, and their dynamic evolution and key role in corporate governance (employee loyalty), executive compensation, and investor decision-making make them of far-reaching research significance. Also, the equity incentives of enterprises play a crucial role in their development. The purpose of this paper is to comprehensively summarize and analyze the development and classification of these incentives. In addition, this paper focuses on the equity incentive policies of Tesla and Xiaomi and explores how and why incentivizing two target groups, namely executives and employees, affects corporate performance, as well as making a side-by-side comparison, and gives some suggestions for future equity incentives.

Corporate social responsibility and the executive-employee pay disparity

We examine the impact of employee-related Corporate Social Responsibility (ER-CSR) on pay disparity between top management and the average worker. Firms with higher ER-CSR ratings have a lower pay disparity and the effect is greatest when executives are paid the most. ER-CSR is associated with a lower ratio of top management's cash and long-term incentive compensation, relative to the average employee's pay. We find that the negative relation is driven by socially responsible firms paying their average employees more. Finally, we document that CSR activities related to employee relations and diversity are those leading to a significant pay disparity reduction.

Long-term operational planning for flexible residential buildings with seasonal storage and capacity-based grid tariffs

When performing operation of the energy system in a building, it is difficult to accurately represent the uncertain long-term objectives in the short-term window, and the correlation between long-term objectives. This work investigates a strategic modelling framework for representing long-term incentives during short-term operational planning for an energy system within flexible buildings. Multi-stage backwards Stochastic Dynamic Programming (SDP) is used to decompose the yearly operational problem into smaller stages, and create long-term cost curves that captures the cost of adjusting long-term price signals, which in this work considers seasonal thermal energy storage and recurring monthly capacity-based grid tariff costs. The proposed method is analyzed for a flexible realistic Norwegian building located in Southern Norway, where the influence both price signals have on long-term operational performance is analyzed. Results show that the framework strategically optimizes the long-term seasonal storage together with the recurring monthly grid tariff, complementing each other by using the seasonal storage to reduce peak costs during winter. With both seasonal storage and monthly demand charge, yearly operational costs are reduced by 4.3% compared to only accounting for the grid tariff. Additionally, the operational performance achieved only a 0.9% higher cost compared to yearly simulation with perfect information.

The inferiors imitate the superiors: the government’s low-carbon concerns and the renewable energy technology of firms

AbstractExisting research has focused mainly on the technological effects of rigid constraints such as low-carbon policies, but there has been little exploration of flexible constraints such as the government’s low-carbon concerns. To explore the role of flexible low-carbon constraints and effective paths for achieving low-carbon development, this paper theoretically and empirically investigates the influence of the government’s low-carbon concerns on local firms’ innovation in renewable energy technology and the underlying mechanism. Benchmark analysis shows that the government’s low-carbon concerns can improve renewable energy technology among firms in an area. Mechanism analysis reveals that low-carbon concerns promote firms’ renewable energy technology adoption by increasing the amount of research and development (R&D) investment and government subsidies and energy use costs of firms in the area. Heterogeneity analysis reveals that heterogeneity exists across technologies, firms, industries and locations in terms of the incentive impact of the government’s low-carbon concerns on the level of renewable energy technology innovation. Extensive analysis indicates that the government’s low-carbon concerns have a long-term incentive impact on the renewable energy technology of local firms and a positive demonstration impact on the renewable energy technology of neighboring firms. This study is helpful in that it explores the major driving factors behind the creation of a low-carbon economy and the achievement of climate targets.

Motivating collusion

We examine how executive compensation can be designed to facilitate product market collusion. We look at the 2013 decision to close several regional offices of the U.S. Department of Justice, which lowered antitrust enforcement for firms located near these closed offices. We argue this made collusion more appealing to shareholders, and find that these firms increased the sensitivity of executive pay to local rivals' performance, consistent with rewarding the managers for colluding with them. The affected CEOs were also granted longer vesting periods, which provides long-term incentives that could foster collusive arrangements.

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.

Ushering in industrial forces for teaching-focused university-industry collaboration in China: a resource-dependence perspective

ABSTRACT This study explores the large-scale involvement of Chinese enterprises in teaching-focused university-industry collaboration (TFUIC), drawing upon the theoretical perspective of resource dependency. Based upon content analysis of Ministry of Education-selected exemplary cases and semi-structured interviews with corporate insiders, the study not only delineates multiple approaches companies take to boost higher education quality, but also unravel the role of economic resources, technological and professional resources in underpinning the implementation of TFUIC. Resources underpinning enterprises’ long-term incentives for participation and the primacy issue between the university sector and industry sector remain challenges to TFUIC.

Personalized Sports Health Recommendation System Assisted by Q-Learning Algorithm

In response to the current problem of single sports plan and lack of long-term motivation in recommendation systems, a more intelligent personalized sports health recommendation system was designed by introducing Q-Learning (Quality Learning) algorithm. Firstly, user sports health data was collected, and the user model was constructed to track user sport preferences and historical behavior. Secondly, the sports environment was defined, including different types of sports activities, venues, and weather. Then, the reward function was formulated to reward and punish users based on their sports activities and goals, in order to maximize long-term health benefits. Finally, the Q-Learning algorithm was implemented to continuously iteratively learn and optimize user recommendation models to provide the best personalized sports recommendations. For personalized accuracy, indicators such as precision, recall, F1 value, MAE (Mean Absolute Error), and RMSE (Root Mean Square Error) were used to evaluate, while the system’s participation in sports, user satisfaction, long-term incentive effects, and overall health improvement were collected. The results showed that the average precision of the recommendation system on 10 different datasets was 88%, and the average AUC (Area Under Curve) was 96%, which was 6.7% higher than the SVD (Singular Value Decomposition) algorithm. The user’s sports persistence rate was improved by 25%, and the health score was improved by about 13.3%. These data not only reflect the superior performance of the recommendation system but also highlight its positive impact on long-term user motivation and overall health levels. The results indicate that the proposed personalized exercise health recommendation system, assisted by the Q-Learning algorithm, has significantly improved accuracy. Moreover, it offers users more intelligent and personalized exercise suggestions, effectively increasing long-term participation in physical activities and overall health levels.

Unknown Worker Recruitment with Long-Term Incentive in Mobile Crowdsensing

Unknown Worker Recruitment with Long-Term Incentive in Mobile Crowdsensing

The effect of long-term incentives of CEO on exploration

The effect of long-term incentives of CEO on exploration

The impact mechanism of ownership change on university innovation

The mixed-ownership reform of job invention achievements (MOJIA) is an important exploration of China’s sound long-term incentive mechanism for transforming job-related inventions. Based on the data of MOJIA pilot universities and regions from 2012 to 2022, this paper analyzes the relationship and mechanism between MOJIA and university innovation (UI) in China by combining resource dependence theory and institutional theory. The study found that MOJIA has a promotive effect on UI. The findings continue to hold after using parallel trend tests, lagged regressions, alternative UI measures, endogeneity control, and placebo tests. MOJIA can enhance the technology achievement marketability in the regions where universities are located. Moreover, MOJIA can facilitate the technological achievements marketability by improving UI. Heterogeneity analysis found that the lower the administrative level and the university’s social reputation, the stronger the promotion effect of MOJIA on UI. The research in this paper provides implications for further improving MOJIA.

Share repurchase and capital market pricing efficiency

Share repurchase has become essential to distribute dividends, optimize long-term incentive mechanisms and improve governance structure. This paper selects the sample data from 2007 to 2021 to investigate stock repurchase in promoting the pricing efficiency. Stock repurchase can reduce the synchronicity. The mechanism test points out that stock repurchase plays an inhibitory role by improving stock liquidity and the quality of information disclosure. The heterogeneity test shows that the mechanisms are significant in state-owned enterprises and enterprises with low internal and external governance efficiency due to the substitution effect of stock repurchase on governance to a certain extent.

Bonuses, options, and bank strategies

This study focuses on the management financial incentives that banking institutions adopt, with the purpose of best serving their corporate strategies. Specifically, a comparative study is carried out between medium- and long-term incentives, under the form of option-based pay, and short-term incentives, which take the form of bonus-based pay. Banking institutions should seek for the best balance between the two types of compensation, weighing their pros and cons under the specific market conditions they face. The paper advocates in favor of including the options modality in incentive packages, given that it stimulates the alignment of interests between owners and managers, allowing these last ones to act in an independent but responsible manner. Bonuses, in turn, require additional shareholders’ supervision, which might be advantageous when the need to reverse harmful effects of poor performance arises. The developed theoretical model is complemented with two numerical exercises (one with simulated data and the other with real data) that corroborate the model’s conjectures.