Treating Equals Unequally: Incentives in Teams, Workers’ Motivation and Production Technology The importance of fair and equal treatment of workers is at the heart of the debate in organizational management. In this regard, we study how reward mechanisms and production technologies affect effort provision in teams. Our experimental results demonstrate that unequal rewards can potentially increa...

In the hold-up problem incomplete contracts cause the proceeds of relation-specific investments to be allocated by ex-post bargaining. The present paper investigates the efficiency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior and equally important preferences are private information. As the sunk investment costs can thus potent...

The value of stock-based compensation is typically taxed as ordinary income to the employee at vesting, but subsequent gains on the stock are capital gains. I examine whether it is ever optimal for an employee to accelerate the payment of ordinary income tax in order for subsequent gains to be taxed at the lower capital gains rate. The employee may accomplish this, for example, by exercising a ...

Individual and Job-Based Determinants of Performance Appraisal: Evidence from Germany We investigate the use of performance appraisal (PA) in German Firms. First, we derive hypotheses on individual and job based determinants of PA usage. Based on a representative German data set on individual employees, we test these hypotheses and also explore the impact of PA on performance pay and further ca...

Agency theory posits that debt-like compensation (such as defined-benefit pensions and other deferred compensation) aligns managerial interests more closely with those of debtholders and reduces the agency cost of debt. Consistent with theory, we find that a higher CEO relative leverage, defined as the ratio of the CEO's inside leverage (debt-toequity compensation) to corporate leverage, is ass...

This paper studies the provision of incentives in a large U.S. training organization which is divided in about 50 independent pools of training agencies. The number and the size of the agencies within each pool vary greatly. Each pool distributes performance incentive awards to the training agencies it supervises, subject to two constraints: the awards cannot be negative and the sum of the awar...

This paper examines the longer-term performance of IPOs from the expiration of the stabilization period to three years after the IPO. It seeks to determine whether employee stock options (ESOs) affect long-term market-adjusted performance after controlling for other influential factors previously uncovered in the IPO and compensation literature, such as executive cash compensation, profitabilit...

We consider the problem of when to deliver the contract payoff, in a continuoustime Principal-Agent setting, in the presence of moral hazard and/or adverse selection. The principal can design contracts of a simple form that induce the agent to ask for the payoff at the time of principal’s choosing. The optimal time of payment depends on the agent’s and the principal’s outside options. Examples ...

We study two types of robust contracting problem under hidden action in continuous time. In type I problem, the principal is ambiguous about the project cash flows, while he is ambiguous about the agent’s beliefs in type II problem. The principal designs a robust contract that maximizes his utility under the worst-case scenario subject to the agent’s incentive and participation constraints. We ...

We provide an analytical and flexible framework to evaluate executive stock options. Our model takes into account the vesting period, American style, resetting and reloading provisions that are features of many options programs, and also considers the trading and hedging restrictions on executives. We identify a recursive structure in the stream of options that are granted to the executive over...