Market For Talent Research Articles

The political and economic environment promoting growth in American wealth inequality

AbstractWealth inequality around the world is high and rising. In this paper, we argue that wealth inequality in the United States has been exacerbated by an environment favourable to the ultra‐wealthy. Three distinctive changes in the economic and political landscape have fostered the increase in inequality. First, campaign finance law abruptly changed after the Citizens United Supreme Court decision. This decision gave the ultra‐wealthy an outsized influence on American politics. Second, an increase in competition for executive talent drove CEO salaries to new heights. Demand increased for executives with general leadership skills as corporations grew larger, increasing competition in the market for executive talent. Third, because tax policy in the United States is subject to lobbying influences, those at the top of the wealth distribution are favoured, leading to further concentration in wealth. Our empirical results are consistent with the view that these changes resulted in an increase in disparity, shifting wealth from the 99% to the 1%.

Audit partner identification, matching, and the labor market for audit talent

AbstractConventional wisdom suggests that audit engagement partner name disclosure benefits investors by informing them about the partners' performance. However, such public disclosure of the identity of the audit partners may also intensify competition for audit talent in the labor market. To examine the economic consequences of audit partner identification, we build a two‐period model in which an audit firm matches partners to clients. The audit partner identification broadens a partner's outside options in the labor market, making talent retention more costly. If the talent‐retention cost is substantial, audit partner identification may cause an audit firm to adjust its partners' compensation packages and mismatch the partners and clients, which may lead to lower audit quality. Overall, we identify unintended consequences of audit partner identification by examining its impact on the audit labor market, and we provide economic reasons for the mixed empirical findings.

Attracting the Best Talent by Being A Great Workplace

Abstract The market for top IT talent is incredibly competitive. Helen Thomas, CEO of Digital Health and Care Wales (DHCW), tells Martin Cooper MBCS why communicating your values can help you find and retain the best people.

CEO employment contract heterogeneity and acquirer risk-taking

This study analyses a hand-collected, unique dataset on chief executive officer (CEO) employment contract details for S&P 500 companies over the period of 1993–2005. To control for the sample selection issue associated with firms granting a CEO contract, the study estimates the Heckman Selection model. The study finds substantial heterogeneity in contract provisions and their impact on acquirer risk-taking in mergers and acquisitions (M&As). More specifically, contract provisions that provide job and compensation security and equity incentives appear to encourage valuable risk-taking. In contrast, bureaucratic type provisions (automatic contract renewals; lack of equity incentives) motivate risky but value-decreasing deals. Further, more refined definitions of just cause for dismissal enhance valuable risk-taking, possibly by reducing contract ambiguities and the resulting disputes, whereas just causes based upon personal conduct reduce valuable risk-taking. This paper shows how heterogeneous contract provisions reflect the optimal contracting process in a competitive market for CEO talent versus managerial power over complacent boards, highlighting the importance of understanding contract complexity and heterogeneity in designing efficient contracts to enhance shareholder value and achieve strategic corporate goals.

REPOSITIONING OF RETENTION STRATEGIES FOR MANAGING NEW GENERATION WORK FORCE

Post liberalization is marked by a shift from command economy to market driven economy, from sheltered market to competitive market and domestic trade to global trade. Talented workforce are today far less restricted than in the past by traditional borders; they have greater scope to choose for whom they work, where they work and in balancing the location of their jobs with the requirements of their life-stage. As the global market for talent tightens, organizations must develop more systematic approaches to recruitment and retention. An ambitious start is to develop a roadmap and a competency framework to enable employers to recruit the right people, to ensure they are in the right job, and can be developed over time in the right way The jobs market has changed, and many employers are finding that they no longer hold all the cards when it comes to retaining staff in today’s fast paced environment. Employees no longer prioritize holding a tenure with their current company over seeking a job elsewhere that better suits their lifestyle and career aspirations. The past few years, it has become abundantly clear for HR managers that they need to reposition their employee retention strategies, in order to keep up with significant changes in the new generation work force needed. Finding out what motivates these new employees and how to best leverage their positive attributes is key to designing an efficient HR game plan.

Managerial Entrenchment and the Market for Talent

Abstract This paper studies how the nature of managerial skills affects firms’ governance decisions. As required skills shift from firm specific toward more general abilities, replacing an underperforming CEO with an outside hire becomes more profitable for shareholders. Therefore, firms adopt stronger governance arrangements to limit the entrenchment of incumbent CEOs and exploit the improved opportunities offered by the market for talent. The analysis rationalizes the observed trend toward stronger corporate governance and offers novel empirical predictions concerning the relationship between managerial entrenchment, firm size, and the nature of managerial skills. (JEL D83, D86, G34) Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Peer benchmarking and CEO compensation: An examination of the community structure of the compensation peer network

AbstractResearch Question/IssueThe increase in executive pay has been attracting attention to the practice of peer benchmarking, which is commonly used to determine CEO compensation. Using a network approach, we construct and analyze the compensation peer network and examine how the structure of the network influences CEO pay.Research Findings/InsightsUsing data on public firms in the period between 2006 and 2020, we find that the peer network exhibits strong community structure and that bridging across communities influences CEO pay. Specifically, CEO pay increases by approximately $10 million as the number of bridging ties increases from 30 to 100, which indicates that obfuscation can result in inflated CEO pay and supports the managerial power perspective.Theoretical/Academic ImplicationsWe empirically distinguish the predicted effect of peer benchmarking on CEO pay as outlined in the market for executive talent and the managerial power perspectives. We show that firms may avoid scrutiny and offer high CEO compensation when they either have a very small number of targeted bridging ties or a very large number of diffused, nontargeted bridging ties in the peer network.Practitioner/Policy ImplicationsThe intent of peer benchmarking was to make CEO compensation practices more transparent, legitimate, and functional; however, our findings indicate that these intentions have not been fully realized and instead benchmarking can be used to inflate CEO pay while avoiding stakeholder scrutiny through obfuscation. These insights provide an opportunity to policy makers to be more effective in encouraging additional transparency and stronger justification for boards' choice of peers.

Network Leadership and Team Creativity: An Exploratory Study of New York City Jazz Bands

Jazz bands exemplify the creative economy of teams engaged in flexible and precarious work. Theory is conflicted concerning how leadership of such audience-facing organizations affects outcomes. For the 346 New York City jazz bands active in 2010, we explored how formal and network leadership related to music creativity and popularity; as well as to band longevity through the year 2021. Formal leadership may direct band members toward joint creative outcomes. Or such leadership may harm the free-flowing energy that fuels creative performance. Network leaders engage in brokering connections across the network of jazz musicians; or building status through connections to central people. The network in this case consisted of ties between people who had overlapping band membership. We found that formal leadership negated band creativity but made no difference to band popularity or longevity. Network leadership, defined as status, facilitated both creativity and popularity, whereas brokerage had no discernible effects. Interestingly, creative bands were less likely to endure. In the creative industries, formalized hierarchy may be less important for a team’s creative output than representation in the external market for talent and aesthetic judgment that well-connected network leaders bring.

Firms' responses to changes in frictions in related human capital factor markets

AbstractResearch SummaryStrategic human capital scholars suggest that firms' human capital rents are greater when labor market frictions are more prevalent. Taking this argument further, we suggest that when frictions for one type of human capital decrease, firms are motivated to place greater emphasis on human capital that is interdependent in production where frictions are unchanged. Empirically, we exploit an exogenous institutional change in the National Football League to demonstrate that coaching (managerial) dismissal and replacement is more likely to occur (and is influenced by a wider variety of information) after frictions for player (production worker) human capital decrease. Our findings suggest adding a new dimension—tradeoffs between related labor market segments—to the scholarly conversation about how firms manage their human capital (and other resources) strategically.Managerial SummaryWe often point to the existence of labor market frictions for different types of human capital as reasons why firms would emphasize one type of human capital over another. But changes in frictions in markets for related human capital, the present focus, can influence this decision as well. In particular, our study demonstrates that when the NFL implemented free agency and a salary cap in the market for player talent in 1993, limiting the ability of teams to stockpile talented players, NFL teams responded by increasing their emphasis on coaching talent in the production of wins. This increased emphasis manifested in more frequent coaching dismissals and a greater influence of different types of information on the desirability of replacing a team's head coach after 1993.

Extreme Wages, Performance and Superstars in a Market for Footballers

We study the determinants of superstar wage effects, asking whether productivity or popularity-based explanations are more appropriate. We use longitudinal wage and performance data for workers (players) and firms (teams) from a particular market for sports talent: Major League Soccer (MLS) in the United States. We find evidence that the top earners, whose annual salaries are mostly not accounted for by their past MLS performances, when compared alongside other footballers, are paid more because they attract significantly higher stadium attendances and thus revenues. There is no evidence that higher residual salary spending by the teams affects their relative performance in football terms, or that the amounts the teams spend on actual talent affect attendances. Taken together, these results suggest that a popularity-based explanation of superstar wage effects is appropriate among the top earners in this labour market.

Extreme Wages, Performance, and Superstars in a Market for Footballers

We study the determinants of superstar wage effects, asking whether productivity or popularity‐based explanations are more appropriate. We use longitudinal wage and performance data for workers (players) and firms (teams) from a particular market for sports talent: Major League Soccer (MLS) in the United States. We find evidence that the top earners, whose annual salaries are mostly not accounted for by their past MLS performances, when compared to other footballers, are paid more because they attract significantly higher stadium attendances and thus revenues. There is no evidence that higher residual salary spending by the teams affects their relative performance in football terms, or that the amounts the teams spend on actual talent affect attendances. Taken together, these results suggest that a popularity‐based explanation of superstar wage effects is appropriate among the top earners in this labor market.

Labor Market Effects of Deleting Delinquencies

We develop a simple model to examine the implications of prohibiting the use of credit histories in hiring practices. We empirically test the model using a recent law implemented in Chile. This law extended periods of unemployment for low-income workers, consistent with the pooling equilibrium in the market for talent predicted by our model. Moreover, these effects are particularly large for younger workers and female workers. While laws that ban credit checks for hiring purposes continue to gain traction, our paper highlights that these laws may not benefit all low-income workers and may instead lead to cross-subsidization within this group.

Earning rent with your talent: Modern-day inequality rests on the power to define, transfer and institutionalize talent

In this article, I develop the point that whereas talent is the basis for desert, talent itself is not meritocratically deserved. It is produced by three processes, none of which are meritocratic: (1) talent is unequally distributed by the rigged lottery of birth, (2) talent is defined in ways that favor some traits over others, and (3) the market for talent is manipulated to maximally extract advantages by those who have more of it. To see how, we require a sociological perspective on economic rent. I argue that talent is a major means through which people seek rent in modern-day capitalism. Talent today is what inherited land was to feudal societies; an unchallenged source of symbolic and economic rewards. Whereas God sanctified the aristocracy’s wealth, contemporary privilege is legitimated by meritocracy. Drawing on the work of Gary Becker, Pierre Bourdieu, and Jerome Karabel, I show how rent-seeking in modern societies has come to rely principally on rent-definition and creation. Inequality is produced by the ways in which talent is defined, institutionalized, and sustained by the moral deservingness we attribute to the accomplishments of talents. Consequently, today’s inequalities are as striking as ever, yet harder to challenge than ever before.

Audit Partner Identification, Assignment, and the Labor Market for Audit Talent

Conventional wisdom suggests that partner identification disclosure can improve audit quality, because it may enhance transparency and individual accountability. Building on a two-period assignment model, we show that under certain conditions, the disclosure can distort partner client assignment because the disclosure can inform the labor market for audit talent. In a decentralized assignment regime in which partners directly bid for clients, we find that the disclosure may give rise to low-balling in the first-period, because partners aggressively lower the audit fees to maximize their career advancement. In a centralized assignment regime in which an audit firm assigns partners to clients, audit firms may distort the assignment in order to dampen partners' career advancement. We also find that in the presence of mandatory partner identification, the optimal partner-client assignment regime depends on the distribution of partners' reputations within an audit firm. Overall, our findings identify unintended consequences of audit partner identification disclosure and provide economic reasons for the mixed empirical findings.

Relative Performance Evaluation in CEO Compensation: A Talent-Retention Explanation

Relative performance evaluation (RPE) in chief executive officer (CEO) compensation can be used as a commitment device to pay CEOs for their revealed relative talent. We find evidence consistent with the talent-retention hypothesis, using two different approaches. First, we examine the RPE terms in compensation contracts and document features that are consistent with retention motives. Second, using a novel empirical specification for detecting RPE, we find RPE is less prevalent when CEO talent is less transferrable: Among specialist CEOs, founder CEOs, and retirement-age CEOs, as well as in industries and states where the market for CEO talent is more restrictive.

The market for talent: Competition for resources and self-governance in teams

In a laboratory setting, we investigate the effect of competition for the resources of team members with ‘divided loyalties’, and the role of such competition in overcoming the free-rider problem associated with the provision of team-level public goods. We find that competition alone creates ‘winners’ and ‘losers’. However, if groups have access to more information on the actions of team members, or are able to determine their membership through ostracism, they are more successful in attracting the ‘loyalties’ of team members. By eschewing the study of additional mechanisms that require external intervention or alterations of payoff functions, our work highlights the potential of implicit competition in promoting cooperation.

CEO talent: A dime a dozen, or worth its weight in gold?

AbstractVery little sophisticated research exists on the size, quality, and efficiency of the labor market for CEO talent. This paper sheds light on this labor market by considering the perspectives of directors directly responsible for hiring and firing the CEOs of the largest publicly traded corporations in the United States. We find that directors overwhelmingly believe that the CEO job is exceptionally challenging and only a handful of executives are qualified to run their company and others in their industry. This suggests that the labor market for outstanding CEO talent is significantly tighter and more competitive than governance experts might realize.

Toward a learned profession: The future of accounting research

The Pathways Commission (2012) recommended that we devote significant efforts to building a learned profession by purposeful integration of accounting research, education, and practice for students, accounting practitioners and educators. The reason this goal is so important for our broadly defined accounting profession is that we are in market for talent with other traditional learned professions such as medicine, law and engineering (and other future learned professions). Potential students want rewarding successful careers so they will migrate to learned professions that help make a difference in the world. The key aspect to a learned profession is intellectual technique (research) that informs practice and teaching. If our accounting profession can enhance the link between research, practice and teaching, we can move towards a learned profession.

Military strategy and unproductive entrepreneurship in warring states China

Institutions play a vital role in allocating entrepreneurial talent in society. Specifically, the payoffs to different kinds of innovation influence the allocation of entrepreneurial talent between productive, unproductive, and destructive behavior. I apply this insight to the case of the military classics of China’s Warring States period, 475–221 BCE. The Warring States witnessed political centralization and incessant conflict that helped inspire numerous economic and social innovations. Among these are the appearance of many texts pertaining to governance and public policy, particularly writings on military strategy. Excellence in strategy and planning were highly rewarded during this period, and competing states even developed an interstate market for military talent. However, success in commerce was often not only frowned upon, but harshly punished. This tendency was reinforced by the rise of Legalist policies, which often recommended suppressing the merchant class relative to agricultural production and militarism. These institutional conditions limited the amount of ‘productive’ market entrepreneurship in the period, which was often instead channeled into ‘unproductive’ entrepreneurship, especially the areas of military organization and strategy.

Comments on Shan and Walter: ‘Towards a Set of Design Principles for Executive Compensation Contracts’

This paper is developed around the set of design principles for executive compensation contracts as outlined in the study of Shan and Walter (2014). We propose guidance for determining an appropriate CEO starting compensation level based on past performance and the market for managerial talent. We also outline factors to be considered in determining annual changes to CEO compensation. This paper argues that stock options and restricted stock grants should become exercisable only upon meeting both time and performance criteria against an appropriate benchmark peer group. We agree with Shan and Walter’s (2014) recommendations regarding termination payments and make suggestions on how to apply these recommendations in practice.