Prioritization of Contracting Methods for Water and Wastewater Projects Using the Fuzzy Analytic Hierarchy Process Method

This study uses the fuzzy analytical hierarchy process (FAHP) method to prioritize contracting methods to determine the most suitable contract option for water and wastewater projects (WWP). Content analysis, a two-round Delphi survey technique, and a series of validation and reliability tests helped establish the 18 key criteria for FAHP analysis. Consequently, data collected from experts through a pairwise comparison questionnaire form the basis for the inputs for the FAHP analysis. Consequently, the final weightings were derived for each of the key criteria and available contracting methods. The results indicate that the bilateral, cooperative, and trilateral contracting methods are the most suitable for WWP in Iran, with the highest weighting. The study provides useful guidance for the top management of project firms in selecting the optimal contracting method for their projects and offers significant contributions from theoretical and practical perspectives.

Board Independence, Nomination and Remuneration Committee, and Compensation in Indonesia

This article aims to examine the relationship between independent commissioners and nomination and remuneration committee (KNR) and their interaction with directors’ compensation using companies listed on the Indonesia Stock Exchange (BEI) and ordinary least square regression analysis technique. This study found that independent commissioners negatively associated with directors' compensation which showed that companies with a higher ratio of independent commissioners provide less directors' compensation due to optimal supervision of management’s opportunistic behavior. In contrast, KNR is positively associated with directors' compensation which means that companies with KNR provide greater compensation because, according to the "optimal contracting approach", the board is assumed to design compensation schemes to provide managers with efficient incentives to maximize shareholder value. Meanwhile, the interaction between the two variables is not associated with directors' compensation because of the negating effect which shows that companies with independent commissioners and KNR do not have a tendency for directors' compensation.

CEO Expertise and the Design of Compensation Contracts: Evidence from Generalist versus Specialist CEOs

Generalist CEOs receive higher pay than specialist CEOs. We examine the implications of CEO expertise for the structure of executive compensation. We follow contract theory and predict that information asymmetry induces generalist CEOs to overstate their ability to a larger extent when contracting with shareholders. Boards of directors take this into account by designing compensation contracts that link their pay more closely to firm performance. Our empirical results support this prediction, and the link is more pronounced when generalist CEOs are less known in the executive labor market or are hired externally. The results hold after we control for a battery of factors that potentially affect incentive pay, including firm characteristics and CEO ability. Overall, our results support the optimal contracting perspective of executive compensation and highlight the importance of CEO expertise generality in resolving adverse selection during the contracting process.

Does family ownership matter in executive pay design?

PurposeThe purpose of this study is to analyse the level and structure of executive compensation of family and non-family businesses and if minority shareholders are expropriated by family businesses in the Australian context using excessive pay. Studies on compensation practices of family businesses are limited to the European and North American contexts. This study, for the first time, considers the Australian context, which is unique with its transparent compensation disclosures, and a principle-based corporate governance framework to examine the level of compensation as well as the association between pay and performance.Design/methodology/approachA set of family and matched non-family firms for the period 2004–2014 are examined in a panel data setting. Robust models are estimated to examine the association between compensation and a set of economic, governance and ownership factors.FindingsThis study finds evidence that family businesses in general pay lower levels of compensation than non-family businesses. An investigation of the role of economic factors on compensation of family and non-family businesses shows evidence that supports the optimal contracting theory. Further examination of governance factors on compensation levels and pay–performance sensitivities shows there is a limited role for managerial power approach in explaining the executive compensation practices of family businesses in Australia. These findings infer that family businesses, given their interest in non-financial goals, do not pay excessive compensation to their executives to expropriate minority shareholders.Research limitations/implicationsThese findings have implications for theory relating to executive compensation and human resource management in all types of businesses, including family firms. These findings offer support for the theory of optimal contracting. Empirical analysis shows no evidence of entrenchment effect or managerial power in family businesses in Australia. In terms of theory-building, there is role for socioemotional wealth model in addition to optimal contracting theory and managerial power approach.Practical implicationsThe findings of this study also have implications for practice. Compensation practices may be designed in such a way that executives and firms pursue broader social goals such as the sustainable development goals or more generally non-financial objectives. Businesses may not necessarily use only financial outcomes when assessing appropriate level of pay of executives. Often, the financial outcomes may involve wealth transfers between different stakeholders and may not necessarily lead to improving the societal well-being. In terms of human resource management, the findings of this study emphasise the need for explicit consideration of socioemotional wealth of all family-related and non-related employees when designing recruitment, training, reward and recognition policies.Originality/valueThis study highlights the role non-financial factors play in executive pay setting processes in family businesses in a highly transparent and principle-based governance framework. Family businesses in Australia are not motivated by monetary considerations, and that their interest in non-financial objectives leads to less emphasis on the link between compensation and performance.

The Cost of Job Loss

This article identifies an equilibrium theory of wage formation and endogenous quit turnover in a labour market with on-the-job search, where risk averse workers accumulate human capital through learning-by-doing and lose skills while unemployed. Optimal contracting implies the wage paid increases with experience and tenure. Indirect inference using German data determines the deep parameters of the model. The estimated model not only reproduces the large and persistent fall in wages and earnings following job loss, a new structural decomposition finds foregone human capital accumulation (while unemployed) is the worker’s major cost of job loss.

On the Study of a Single-Period Principal-Agent Model with Taxation

This paper investigates a single-period principal-agent model with moral hazard. In the model, we implement bonus tax for the agent and analyze the effect of loss aversion by comparing with the results by Dietl et al. (2013). The existence and uniqueness of the optimal contracting problem are proved. Through an example, concrete illustrations of how loss aversion affects the compensation package are given. It is shown that although the agent’s efforts reduce, the fixed salary and marginal bonus paid by principal are increasing with the tax rate if the agent’s risk aversion and shocks in the economy are small. When the effect of loss aversion is sufficiently large, the curve of fixed salary is nonmonotonic, and the complementarity between fixed salary and marginal bonus disappears.