Do Performance-Based Pay and Pay Competitiveness Moderate the Relation Between Lower-Level Employees Total Compensation and Job Satisfaction? Evidence from South Korea

Decades of international multidisciplinary studies have examined how compensation affects employees and organizations, but they neither specify the boundary conditions for employee job satisfaction nor differentiate the effects of pay on job satisfaction of employees at differing tiers within an organization. We explore whether performance-based pay and pay competitiveness moderate the relation between total compensation and job satisfaction among lower-level employees in South Korea. To investigate boundary conditions for that relation, we use performance-based pay and pay competitiveness as variables that tie compensation structure to job satisfaction. Drawing from data for 2,281 employees at 470 South Korean firms, we consider how two variables—incentive compensation and pay competitiveness—influence job satisfaction of lower-level employees. First, we confirmed a positive relationship between compensation and job satisfaction, and second, we found that the relationship is stronger among employees of firms where average compensation is below what is paid elsewhere.

Preoperative Versus Postoperative Compensation of the Contralateral Normal Kidney in Patients Treated with Radical Nephrectomy for Renal Cell Carcinoma

Background: We sought to identify the factors affecting renal compensatory processes that occur preoperatively as well as postoperatively in patients treated with radical nephrectomy (RNx) for renal cell carcinoma (RCC). Methods: We retrospectively reviewed the records of 906 patients treated with RNx for RCC. We defined the early compensatory process (process 1) as compensatory adaptation of the contralateral normal kidney (CNK) before RNx. We defined the late compensatory process (process 2) as compensatory adaptation of the CNK after RNx. Total compensation was defined as the combination of these two processes. Multivariable logistic regression analyses were used to identify significant factors associated with processes 1, 2, and total compensation. Results: Mean preoperative, 1-week, and 5-year postoperative estimated glomerular filtration rates (eGFR) were 84.5, 57.6, and 63.7 mL/min/1.73 m2, respectively. Female sex (p < 0.001), lower body mass index (BMI) (p < 0.001), absence of hypertension (p = 0.019), lower preoperative eGFR (p < 0.001), larger tumor volume (p < 0.001), and larger CNK volume (p < 0.001) were significantly associated with process 1. Younger age (p = 0.019), higher BMI (p < 0.001), and absence of diabetes mellitus (DM) (p = 0.033) were significantly associated with process 2. Female sex (p < 0.001), younger age (p < 0.001), absence of DM (p = 0.002), lower preoperative eGFR (p < 0.001), and larger tumor (p = 0.001) and CNK volumes (p < 0.001) were significantly associated with total compensation. Conclusions: Different factors affected each compensatory process. Process 1 made a greater contribution to the entire renal compensatory process than process 2.

Contracting with Controllable Risk

We examine how executives' ability to control their firm's exposure to risk affects the design of their incentive-compensation contracts. Our natural experimental evidence shows that exchange-traded weather derivatives allow executives to control their firm's exposure to weather risk. Once these derivatives became available those executives who use them to hedge experience relative reductions in their total compensation and equity incentives. The decline in compensation is consistent with a reduction in the risk premium that executives receive for exposure to weather risk. The decline in equity incentives is consistent with the relation between risk and incentives shifting in a complementary direction when executives can better control their firm's exposure to risk. Collectively, our findings provide evidence that executives' ability to control their firms' exposure, and by extension their own, to an important source of risk influences the design of their incentive-compensation contracts.

The Effects of Prize Structures on Innovative Performance

Successful innovation is essential for the survival and growth of organizations, but how best to incentivize innovation is poorly understood. We compare how two common incentive schemes affect innovative performance in a field experiment run in partnership with a large life sciences company. We find that a winner-takes-all compensation scheme generates significantly more novel innovation relative to a compensation scheme that offers the same total compensation but shares it across the ten best innovations. Moreover, the winner-takes-all scheme does not reduce innovative output on average and, among teams of innovators, generates more output than the less risky prize structure.

The Profitability of Revenue-Based Quotas Under Price Negotiation

We study how the presence of a monthly revenue-based quota impacts a retailer’s profits when prices are negotiated by a salesperson. Using transaction level data for refrigerators, we first provide reduced-form evidence that prices are impacted by the quota: the negotiated discounts are approximately 3.8% higher if the salesperson is 10% closer to reaching the quota in the final week of the month. Guided by this result, we specify and estimate a demand model that identifies the impact of the quota through two forces: the effort salespeople expend in order to sell the product and their bargaining position. Results indicate that, as salespeople get closer to reaching their quota, their effort increases regardless of the week, and their bargaining position weakens (i.e., they offer lower prices), but only in the final week of the month. We use these results to analyze the impact of the quota and find that, holding salespeoples’ total compensation fixed, eliminating quotas results in 8% lower profit for the retailer. This decrease stems primarily from the reduction in effort that outweighs any benefit from strengthening the salespeoples’ bargaining position. The change in profit is economically meaningful because eliminating both price negotiation (i.e., moving to fixed pricing) and the quota results in an up to 36% reduction in profit. This paper was accepted by Matthew Shum, marketing.

Corporate control contests and the asymmetric disclosure of bad news: Evidence from peer firm disclosure response to takeover threat

We examine the voluntary disclosure behavior of peer firms of hostile takeover targets. We find that peer firms under control threat use a disclosure strategy that emphasizes bad news: they provide more bad news forecasts, tend to bundle bad news forecasts with earnings announcements, use more negative tone in conference call presentations, and more evenly distribute negative tonal words throughout the presentation to heighten the visibility of bad news. This asymmetric disclosure of bad news is concentrated in firms whose managers have greater incentives to mitigate control threats - firms with younger CEOs, CEOs with higher total compensation, and firms with weaker anti-takeover provisions. Further tests show that peer firms also manage accruals downward. We contribute to the sparse literature on the impact of corporate control contests on voluntary disclosure by demonstrating that peer firms under control threat emphasize bad news to preempt control threat.

La retribución financiera como herramienta de la dirección estratégica

This study focuses on the importance of financial compensation as an element of total compensation, and its relationship with strategic management. For this, each type of financial compensation has been analyzed, these being fixed, variable and indirect. The results obtained are based on a sample of 92 human resources managers in organizations from different sector. The causal relationship between each of the different types of financial compensation is demonstrated through a model of structural equations, the most intense being that between the strategic direction and the variable rate, followed by the fixed rate and finally the type indirect. In addition, it is demonstrated that there is a significant relationship between the human resources management and the strategic management of the organization, which is of great importance for the development of total compensation strategies as an important tool of the human resources management.

CEO Noncompete Agreements, Job Risk, and Compensation

Using hand-collected data on CEO noncompete agreements (NCAs), we find that NCAs are less common when CEOs expect to incur greater personal costs from reduced job mobility and more common when firms expect to suffer greater economic harm if departing CEOs leave to work for a competitor. Additionally, turnover-performance sensitivity is stronger when CEOs have NCAs. Finally, total compensation and incentive pay are higher if CEOs have more enforceable NCAs. Our identification strategy exploits staggered state-level changes in NCA enforceability. Overall, our findings suggest that restrictions on job mobility have important implications for how CEOs are monitored and compensated.