Threat Of Dismissal Research Articles

Legal Protection against Retaliatory Firing Improves Workplace Safety

Abstract Workplace safety policies are designed to ensure that employers internalize the costs of injuries, but employers can undermine these policies with threats of dismissal. We show that states’ adoption of the public policy exception to at-will employment—an exception forbidding employers from firing workers for filing workers’ compensation claims or for whistleblowing—led to a substantial reduction in injuries. The widespread adoption of the public policy exception explains 14% of the decline in fatal injury rates between 1979 and 1994. Statutory protections from retaliatory firing also improved safety, but only when employers faced sufficiently strong penalties for violating them.

New contracts and dismissal threats from highly drafted rookies: What motivates NFL quarterbacks?

The authors examined whether incumbent starting quarterbacks in the National Football League (NFL) performed better after their teams drafted another quarterback in the first round of the preceding draft. There was some evidence that quarterbacks exhibited slightly improved performance under these conditions. However, the impact on performance was small. There was little evidence of opportunistic behavior by quarterbacks, but quarterbacks may perform slightly better in the first year of a new contract. The authors conclude that quarterbacks are already exerting at or near their maximum effort level and thus their performances are unlikely to be greatly impacted by dismissal threats or contract details.

Is Effective Teacher Evaluation Sustainable? Evidence from District of Columbia Public Schools

Abstract Ten years ago, many policy makers viewed the reform of teacher evaluation as a highly promising mechanism to improve teacher effectiveness and student achievement. Recently, that enthusiasm has dimmed as the available evidence suggests the subsequent reforms had a mixed record of implementation and efficacy. Even in districts where there was evidence of efficacy, the early promise of teacher evaluation may not be sustainable as these systems mature and change. This study examines the evolving design of IMPACT, the teacher evaluation system in the District of Columbia Public Schools. We describe the recent changes to IMPACT, which include higher performance standards for lower-performing teachers and a reduced emphasis on value-added test scores. Descriptive evidence on the dynamics of teacher retention and performance under this redesigned system indicates that lower-performing teachers are particularly likely to either leave or improve. Corresponding causal evidence similarly indicates that imminent dismissal threats for persistently low-performing teachers increased both teacher attrition and the performance of returning teachers. These findings suggest that teacher evaluation can provide a sustained mechanism for improving the quality of teaching.

Legal Protection Against Retaliatory Firing Improves Workplace Safety

Workplace safety policies are designed to ensure that employers internalize the costs of injuries, but employers can undermine these policies with threats of dismissal. We show that states' adoption of the public policy exception to at-will employment---an exception forbidding employers from discharging workers for filing workers' compensation claims or whistleblowing about illegal conditions---led to a substantial reduction in serious injuries. The widespread adoption of the public policy exception explains 13 percent of the overall decline in fatal injury rates between 1979 and 1994. The exception averted more injuries at unionized workplaces than at non-unionized workplaces.

Executive labor market segmentation: How local market density affects incentives and performance

I study how the density of executive labor markets affects managerial incentives and thereby firm performance. I find that U.S. executive markets are locally segmented rather than nationally integrated, and that the density of a local market provides executives with non-compensation incentives. Empirical results show that in denser labor markets, executives face stronger performance-based dismissal threats as well as better outside opportunities. These incentives result in higher firm performance in denser markets, especially when executives have longer career horizons. Using state-level variation in the enforceability of covenants not to compete, I find that the positive effects of market density on incentive alignment and firm performance are stronger in markets where executives are freer to move. This evidence further supports the argument that local labor market density works as an external incentive alignment mechanism.

Restricting Russians: language and immigration laws in Soviet Latvia, 1956–1959

In 1956, a prominent faction within the leadership of Soviet Latvia, the Latvian national communists, launched two ambitious initiatives designed to redress perceived Stalinist Russification polices – a language law and residency restrictions. This article examines and evaluates these two policies and asks if they were part of a “Latvianization” program that deliberately targeted Russians for denial of residency permits and required Russians to gain Latvian-language competency within a two-year timeframe or face the threat of dismissal. In an effort to restore the primacy of the Latvian language, the national communists created a law enforcing knowledge of Latvian and Russian for Communist Party and government functionaries and service sector personnel. Using the Soviet legal system, the national communists also attempted to halt the influx of predominantly Slavic immigration to the Latvian capital, Riga. By instituting passport restrictions on settling in the city, the national communists sought to limit Slavic migration in order to maintain Riga's Latvian character and reduce pressure on the city's housing supply and municipal services. Existing studies deem passport restrictions in other Soviet cities a failure. The author argues, however, that the national communists’ scheme was generally successful, dramatically curbing migration to Riga during its operation.

Price Co-Movements, Information Asymmetry and Investment Funds

This paper discusses price co-movements between independent financial markets populated by risk neutral global funds and specialized funds. The investment decisions are delegated to risk neutral fund managers who are informed or uninformed of the state of the world and have reputational concerns. I show that in equilibrium, prices of the risky assets co-move with each other following shocks to ex-ante probabilities of default. The mechanism that generates this co-movement relies on two sources: the information asymmetry between fund managers and the reputational concerns of uninformed fund managers facing the threat of dismissal. The reputational channel reinforces the co-movement but it is not necessary to generate it; information asymmetry induces co-movement even in the absence of reputational concerns.

Altruism and Relational Incentives in the Workplace

This paper studies how altruism between managers and employees affects relational incentive contracts. To this end, we develop a simple dynamic principal–agent model where both players may have feelings of altruism or spite toward each other. The contract may contain two types of incentives for the agent to work hard: a bonus and a threat of dismissal. We find that altruism undermines the credibility of a threat of dismissal but strengthens the credibility of a bonus. Among others, these two mechanisms imply that higher altruism sometimes leads to higher bonuses, whereas lower altruism may increase productivity and players' utility in equilibrium.

Threats of dismissal and symptoms of major depression: a study using repeat measures in the Swedish working population

BackgroundJob insecurity is considered a profound work stressor. While previous research has indicated that job insecurity represents a substantial mental health burden, few studies have examined its relationship with symptoms...

Executive Market Segmentation: How Local Density Affects Incentive and Performance

I study how the density of executive labor markets affects managerial incentives and thereby firm performance. I find that U.S. executive markets are locally segmented rather than nationally integrated, and that the density of a local market provides executives with non-compensation incentives. Empirical results show that in denser labor markets, executives face stronger performance-based dismissal threats as well as better outside opportunities. These incentives result in higher firm performance in denser markets, especially when executives have longer career horizons. Using state-level variation in the enforceability of non-compete clauses, I find that the positive effects of market density on incentive alignment and firm performance are stronger in markets where executives are freer to move. This evidence further supports the argument that local labor market density works as an external incentive alignment mechanism.

Incentives, Selection, and Teacher Performance: Evidence from IMPACT

Teachers in the United States are compensated largely on the basis of fixed schedules that reward experience and credentials. However, there is a growing interest in whether performance-based incentives based on rigorous teacher evaluations can improve teacher retention and performance. The evidence available to date has been mixed at best. This study presents novel evidence on this topic based on IMPACT, the controversial teacher-evaluation system introduced in the District of Columbia Public Schools by then-Chancellor Michelle Rhee. IMPACT implemented uniquely high-powered incentives linked to multiple measures of teacher performance (i.e., several structured observational measures as well as test performance). We present regression-discontinuity (RD) estimates that compare the retention and performance outcomes among low-performing teachers whose ratings placed them near the threshold that implied a strong dismissal threat. We also compare outcomes among high-performing teachers whose rating placed them near a threshold that implied an unusually large financial incentive. Our RD results indicate that dismissal threats increased the voluntary attrition of low-performing teachers by 11 percentage points (i.e., more than 50 percent) and improved the performance of teachers who remained by 0.27 of a teacher-level standard deviation. We also find evidence that financial incentives further improved the performance of high-performing teachers (effect size = 0.24).

Offline: The necessity (and risks) of science advocacy

Should doctors ever convert a clinical problem into a campaign promise? If the experience of one correspondent is anything to go by, doctors should steer clear of anything that could be remotely branded “activist”. She is a prominent UK medical scientist, a person who has campaigned hard to promote clinical research. But in our modern NHS—where fear is the dominant leitmotiv—institutions tend to baulk at those they perceive to be troublemakers. Her outspoken comments have led to threats of dismissal. To keep her job, she was forced to sign a statement forbidding her to speak publicly. She lost the right to lead research projects. Her university would almost certainly like her to resign voluntarily. She worries that she will soon be sacrificed to save the institution's misguided actions. So it might seem like a mistake to make noise about a severe, yet hidden, health crisis in the UK, one that our medical and public health leaders seem happy to neglect.

Employment Protection, Threat and Incentive Effects on Worker Absence

AbstractThis article provides new evidence on the effect of changes in employment protection on worker absence. We use novel multi‐organization data to examine changes in worker absence as workers move from temporary to permanent employment contracts. We demonstrate a robust positive effect of employment protection on sickness absence. It has also been suggested that the impact of employment protection on absence and effort is due to a fear of dismissal. We also provide evidence that suggests that temporary workers' absence is influenced by incentives to attain jobs with protection that is unrelated to threat of dismissal. This has not been considered in earlier research. This channel of employment protection effects has important policy implications.

Bonus Payments versus Efficiency Wages in the Repeated Principal-Agent Model with Subjective Evaluations

We study an infinitely repeated principal-agent model with subjective evaluations. We compare the surplus in efficiency-wage equilibria and in bonus-payments equilibria. The agent receives a constant wage and is motivated by the threat of dismissal in efficiency-wage equilibria. The agent receives a bonus and quits the relationship after disagreements between his self-evaluation and the principal's performance appraisal in bonus-payments equilibria. We construct a class of equilibria with bonus payments that approach efficiency as patience increases. In contrast, payoffs from efficiency-wage equilibria are bounded away from the Pareto-payoff frontier for any discount factor. (JEL D82, J33, J41)

Social Relations and Relational Incentives

textabstractThis paper studies how social relationships between managers and employees affect relational incentive contracts. To this end we develop a simple dynamic principal-agent model where both players may have feelings of altruism or spite toward each other. The contract may contain two types of incentives for the agent to work hard: a bonus and a threat of dismissal. We find that good social relationships undermine the credibility of a threat of dismissal but strengthen the credibility of a bonus. Among others, these two mechanisms imply that better social relationships sometimes lead to higher bonuses, while worse social relationships may increase productivity and players' utility in equilibrium.

Boards in Practice: Director Location, Qualifications, and Credible Contracting

Using data on the qualifications and residential locations of directors, we study boards “in practice.” We find that directors’ qualifications and distance from headquarters are related to factors such as the proximity of headquarters to a large city, firm size, CEO power, and the board’s need for tacit information. Directors’ proximity to headquarters reflects a trade-off between better acquisition of tacit information and greater management influence. The stock market responds positively to the appointment of proximate directors, but only when CEO tenure is short. The market reaction to forced CEO turnover is negative for boards with proximate directors and long-tenured CEOs. Neither the appointment of a remote director nor the dismissal of a CEO by a remote board leads to abnormal market reactions on average. These appointment and turnover results suggest that distant directors act as “market proxies,” while proximate directors add a credible “two-sided” element to governance. We also observe that when a CEO is highly “legitimate,” such as in a family firm, she faces less stringent incentives from incentive pay and a reduced threat of dismissal. In sum, our empirical findings support Williamson’s (2008) arguments that stress the importance of understanding credible contracting between boards and management and that raise concerns about public policy aimed at achieving “boards in principle.”

The Education Show

Primary Teacher UpdateVol. 2012, No. 6 EventsThe Education ShowRachel WomackRachel WomackSearch for more papers by this authorRachel WomackPublished Online:29 Sep 2013https://doi.org/10.12968/prtu.2012.1.6.44AboutSectionsView articleView Full TextPDF/EPUB ToolsAdd to favoritesDownload CitationsTrack CitationsPermissions ShareShare onFacebookTwitterLinked InEmail View article FiguresReferencesRelatedDetails 1 March 2012Volume 2012Issue 6ISSN (print): 2047-8917ISSN (online): 2052-4609 Metrics History Published online 29 September 2013 Published in print 1 March 2012 Information© MA Education LimitedPDF download

Promotions, Dismissals, and Employee Selection: Theory and Evidence

Firms offer highly complex contracts to their employees. These contracts contain a mix of incentives, such as fixed wages, bonus payments, promotion options, and dismissals or threats of dismissal. In this article, we show that firms having a production process that is sensitive to employee quality may find it optimal to combine cost-efficient incentives such as bonuses and promotions with dismissals. Based on this result, we derive a hierarchy of incentives. Furthermore, we demonstrate the close link between the optimal contract and the employee sorting and selection and use this to analyse the information conveyed in employment matches. The Author 2009. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Contingent Control Rights and Managerial Incentives: The Design of Long-term Debt

This paper investigates the optimal design of long-term financial contracts when future investments are non-contractible ex-ante. We show that creditors are willing to write long-term debt if they are granted the right to replace the manager, extend debt maturity and take over the company as a going concern upon default. It is the combination of these control rights that makes these contracts sustainable. The threat of dismissal induces the manager to comply with the contract and make appropriate investments during the life of the contract even when these investments cannot be contracted upon. But it is the creditors' ability to extend the maturity of the contract upon default that makes this threat credible. We further show that if equity and debt has the same concentration, equally strong legal rights and if there are no tax benefits of holding debt, then a project that can raise long-term debt can also raise outside equity but the reverse is not true: there are projects that cannot issue debt but may still obtain outside equity financing. This is so because of the nature of the debtholders' control rights in no-default states. Since debtholders have contingent control rights, they cannot exercise control unless default has occurred. Hence, the manager can plan his strategic default ahead of time and milk the assets prior to default. For this reason, strategic default is more profitable for the manager when debt is used. Hence, the manager demands a higher compensation threshold in the case of debt financing. This is an endogenous indirect bankruptcy cost. The presence of this cost provides a rationale for a tax code that favors debt. With a code that allows for the tax-deductibility of interest, competition among investors increases since investors can trade off this bankruptcy cost against the tax benefits of debt. When interest is tax-deductible, projects with safe cash flows will strictly prefer to raise debt and projects with more volatile cash flows will issue outside equity.

Managerial Power and Shareholder Intervention

If managers have the power to determine their own compensation, the only limit to managerial rent extraction is the threat of dismissal by shareholders. Shareholder intervention is, however, problematic for two reasons. First, replacing an entrenched manager is costly. And second, the information required to evaluate the need for intervention is, to a large extent, provided by the manager. This paper presents a model of shareholder intervention with these two ingredients. The model shows that making intervention less costly for shareholders leads to more frequent shareholder intervention in equilibrium and to more information revelation by the manager. However, it also has the perverse efiect of reducing the manager’s incentives to take the proflt-maximizing action.