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We investigate the economic role of proxy advisors (PAs) in the context of mandatory \"say on pay\" votes, a novel and complex item requiring significant firm-specific analysis. PAs are more likely to issue an Against recommendation at firms with poor performance and higher levels of CEO pay and do not appear to follow a \"one-size-fits-all\" approach. PAs' recommendations are the key determinant of voting outcome but the sensitivity of shareholder votes to these recommendations varies with the institutional ownership structure, and the rationale behind the recommendation, suggesting that at least some shareholders do not blindly follow these recommendations. More than half of the firms respond to the adverse shareholder vote triggered by a negative recommendation by engaging with investors and making changes to their compensation plan. However, we find no market reaction to the announcement of such changes, even when material enough to result in a favorable recommendation and vote the following year. Our findings suggest that, rather than identifying and promoting superior compensation practices, PAs' key economic role is processing a substantial amount of executive pay information on behalf of institutional investors, hence reducing their cost of making informed voting decisions. Our findings contribute to the literature on shareholder voting and the related policy debate.

This study examines the effects of shareholder support for equity compensation plans on subsequent CEO compensation. Using cross-sectional regression, instrumental variable, and regression discontinuity research designs, we find little evidence that either lower shareholder voting support for, or outright rejection of, proposed equity compensation plans leads to decreases in the level or composition of future CEO incentive compensation. We also find that, in cases where the equity compensation plan is rejected by shareholders, firms are more likely to propose, and shareholders are more likely to approve, a plan the following year. Our results suggest that shareholder votes for equity pay plans have little substantive impact on firms' incentive compensation policies. Thus, recent regulatory efforts aimed at strengthening shareholder voting rights, particularly in the context of executive compensation, may have limited effect on firms' compensation policies.

Positive effects of incentives on salespeople's motivation, effort, and performance are well-established in literature. This article takes a novel look at their influence on salespeople's health. The results of four empirical studies, including more than 1,400 salespeople, suggest that an increasing variable compensation share (i.e., greater pay-for-performance component in salespeople's compensation plans) increases salespeople's stress, resulting in emotional exhaustion and more sick days. These outcomes are more likely for salespeople with lower personal ability and fewer social resources. The harmful effects of the variable compensation share on salespeople's health reduce the positive effects of this incentive on sales performance. To practice better marketing for a better world, if variable compensation is used, the authors recommend that managers screen new hires for job-related resources and help their existing staff build such resources. In addition, companies may personalize incentive schemes and sensitize managers to the stress-inducing effects of variable compensation shares.

Motivating innovation is important in many incentive problems. This paper shows that the optimal innovation-motivating incentive scheme exhibits substantial tolerance (or even reward) for early failure and reward for long-term success. Moreover, commitment to a long-term compensation plan, job security, and timely feedback on performance are essential to motivate innovation. In the context of managerial compensation, the optimal innovation-motivating incentive scheme can be implemented via a combination of stock options with long vesting periods, option repricing, golden parachutes, and managerial entrenchment.

We examine how an increase in stock option grants affects CEO risk-taking. The overall net effect of option grants is theoretically ambiguous for risk-averse CEOs. To overcome the endogeneity of option grants, we exploit institutional features of multiyear compensation plans, which generate two distinct types of variation in the timing of when large increases in new at-the-money options are granted. We find that, given average grant levels during our sample period, a 10% increase in new options granted leads to a 2.8% to 4.2% increase in equity volatility. This increase in risk is driven largely by increased leverage.

Learning Objectives: Understand alternative methods to increase faculty submission of resident end-of-shift evaluations by incorporating this metric into the faculty incentive compensation plan.Background: In the Program Requirements for Graduate Medical Education (GME) in EM, the Accreditation Council for GME states “Feedback from faculty members in the context of routine clinical care should be frequent.” It is a common challenge for program leadership to obtain adequate and effective summative evaluations. Previous attempts at our institution to increase feedback have had limited effect.Objectives: Department leadership hypothesized that linking completed evaluations to the faculty incentive compensation plan would increase the quantity of evaluations.Methods: This is a retrospective, case-crossover interventional study conducted at an academic tertiary level 1 trauma center and primary EM residency teaching site. At the start of the 2021 fiscal year (FY21), submission of resident evaluations was added as an incentive compensation metric. We examined fiscal year 2020 (FY20) and FY21 to compare the number of evaluations per shift per attending and total FY quantity of completed evaluations. We included faculty who were employed for the duration of FY20 and FY21. We excluded fellows, faculty who do not routinely work with residents, non-resident shifts, and incomplete evaluations.Results: We identified an increase of 42% in total evaluations completed after implementation of the incentive metric with an increase from 1149 evaluations in FY20 to 1629 evaluations in FY21 (Figure 1). 32 of the 38 faculty members included had an increase in evaluations per shift from pre- to post-intervention (Figure 2).Conclusions: Incentivizing faculty to submit resident evaluations through the use of bonus compensation increased the number of evaluations at our institution. This information may be used by others to support similar interventions to increase written feedback. This study is limited to a single academic site as well as limited to a finite period of time. Further research will need to be conducted to determine if this trend continues over time.

We analyze the roles of bank ownership, management, and compensation structures in bank failures during the recent financial crisis. Our results suggest that failures are strongly influenced by ownership structure: high shareholdings of lower-level management and non-chief executive officer (non-CEO) higher-level management increase failure risk significantly. In contrast, shareholdings of banks' CEOs do not have a direct impact on bank failure. These findings suggest that high stakes in the bank induce non-CEO managers to take high risks due to moral hazard incentives, which may result in bank failure. We identify tail risk in noninterest income as a primary risk-taking channel of lower-level managers.

We estimate a dynamic structural model of sales force response to a bonus-based compensation plan. This paper provides substantive insight into how different elements of the compensation plan enhance productivity. We find evidence that (1) bonuses enhance productivity across all segments; (2) overachievement commissions help sustain the high productivity of the best performers, even after attaining quotas; and (3) quarterly bonuses help improve performance of the weak performers by serving as pacers to keep the sales force on track in achieving its annual sales quotas. The paper also introduces two main methodological innovations to the marketing literature: First, we implement empirically the method proposed by Arcidiacono and Miller [Arcidiacono P, Miller RA (2011) Conditional choice probability estimation of dynamic discrete choice models with unobserved heterogeneity. Econometrica 79(6):1823-1867] to accommodate unobserved latent-class heterogeneity using a computationally light two-step estimator. Second, we illustrate how discount factors can be estimated in a dynamic structural model using field data through a combination of (1) an exclusion restriction separating current and future payoff and (2) a finite-horizon model in which there is no forward-looking behavior in the last period.

SUMMARY AUTHORED BY GEORGE TWARDY, III· C.A. No. 2023-0873-LWW Court of Chancery of the State of Delaware October 21, 2024 Key Takeaway: Technology assisted review (\"TAR\") may be used at the producing party's discretion if it is proportional to the case's needs and helps reduce the burden of document review, provided the producing party is transparent about its use. [...]the court discussed the relevancy of the Pre-2020 Documents. [...]the court discussed Plaintiff's request for written discovery. Ultimately, the court denied the motion to compel an interrogatory response of such deeply personal information because the Plaintiff failed to show satisfactory cause for invading the \"privacy of [a party].\" [...]the parties were ordered to meet and confer regarding a better way to produce this type of information.

As a crucial component of internal corporate governance, remuneration controls possess the potential to influence the cash holdings of firms. However, identifying the causal relationship between these controls and such holdings presents a considerable challenge. To address this research gap, this paper leverages the implementation of China’s Guidance on Further Regulating the Remuneration Management of Heads of Central Enterprises as a quasi-natural experiment to investigate the relationship between executive remuneration controls and firms’ cash holdings, utilizing a double-difference approach. Based on an analysis of a sample of listed companies from 2007–2012, the results indicate that firms subject to regulated executive compensation exhibit lower cash holdings. To ensure the robustness of these findings, various statistical techniques such as parallel trend tests, variable replacement, propensity score matching, and placebo tests were employed. Additionally, a mechanism test was conducted, whereby the mediating effect of executive compensation controls on firms’ cash holdings was examined, revealing a reduction in internal agency costs. Finally, the analysis of heterogeneity demonstrated that the impact of executive compensation controls on firms’ cash holdings was more pronounced in companies with high-quality internal controls, stronger management oversight, and lower information asymmetry.