Do Tournament Incentives Matter for CEOs to Be Environmentally Responsible? Evidence from Chinese Listed Companies

Relying on tournament theory and environmental management research, we examine how CEO tournament incentives induce top executives to invest more in green innovation. Using a sample of Chinese listed companies from 2010 to 2016, we find evidence that CEO tournament incentives are positively associated with green innovation. In addition, we find that a positive relationship between CEO tournament incentives and green innovation is stronger in state-owned enterprises than in non-state-owned enterprises. These results support tournament theory, which proposes that better incentives induce top executives’ efforts to win the tournament incentives, and such efforts are subject to fiercer competition among employees, which improves firms’ social and financial performance. Moreover, our findings have implications for policy makers and regulators who wish to enhance environmental legitimacy by providing tournament incentives to top executives.

The top-heavy shape of authoritarian bureaucracy: evidence from Russia and China

The prevalence of top-heavy bureaucracies in non-democracies cannot be explained by the theories of Parkinson, Tullock, Niskanen, or Simon or by classical managerial theories. When bureaucracy positions carry rents, the competition for promotion becomes a rent-seeking process. Borrowing the career-tournament theory framework from managerial scholarship, we argue that top-heavy bureaucracy resembles a tournament with too many finalists. When rent is centralized at the top (i.e. power centralization), as is the case in many non-democracies, the optimal bureaucracy should be top-heavy, accommodating and encouraging relatively more finalists at the top to compete for the final big prize. We provide suggestive evidence by analyzing ministry organizations in China (1993–2014) and Russia (2002–2015). After some fluctuations, the shape of Russian ministries eventually converged with that of China. In the steady state, their ministry shapes are far more top-heavy than what is prescribed by managerial theories. At the micro-level, ministry power centralization, measured by the perceived influence of the ministers, is correlated with ministry top-heaviness in Russia. Points for practitioners Our theory suggests that a top-heavy authoritarian bureaucratic structure naturally follows from a back-loaded sequential career tournament and an effort-maximizing bureaucratic leader. Our findings also suggest that Chinese and Russian ministries both converge to a highly top-heavy structure in the long run. We demonstrate that the top-heavy structure first arose during the planned-economy experiment in the Soviet Union. Our research sheds new light on public-sector reforms that aim to reduce bureaucracy top-heaviness in autocracies.

Promotion to Partner in Large Law Firms Operating in the United Kingdom: Tournament Theory and the Monitoring of the Implied Promise

<p>This research is a study of the promotion to partner process in large law firms in the United Kingdom (UK). It is concerned with the application of tournament theory to such firms. In particular it is an examination of the ability of associate lawyers to monitor the implied promise that, in prescribed circumstances, they will have the opportunity of becoming a partner at their firms. In order to identify whether or not the rules of tournament theory on promotion to partnership hold true when set against the experiences of lawyers in large law firms operating in the UK, I established a theoretical framework based on a review of the relevant literature. I then tested that theoretical framework with data from two sources: case study interviews with partners at a large UK law firm; and a questionnaire distributed to a wider sample group of partners across a number of large UK law firms. The research found strong evidence to support the application of the core elements of tournament theory to large law firms in the UK. The research also found, however, that the implied promise envisaged by tournament theory was not the promise monitored by the individuals who took part in the research project.</p>

Promotion to Partner in Large Law Firms Operating in the United Kingdom: Tournament Theory and the Monitoring of the Implied Promise

<p>This research is a study of the promotion to partner process in large law firms in the United Kingdom (UK). It is concerned with the application of tournament theory to such firms. In particular it is an examination of the ability of associate lawyers to monitor the implied promise that, in prescribed circumstances, they will have the opportunity of becoming a partner at their firms. In order to identify whether or not the rules of tournament theory on promotion to partnership hold true when set against the experiences of lawyers in large law firms operating in the UK, I established a theoretical framework based on a review of the relevant literature. I then tested that theoretical framework with data from two sources: case study interviews with partners at a large UK law firm; and a questionnaire distributed to a wider sample group of partners across a number of large UK law firms. The research found strong evidence to support the application of the core elements of tournament theory to large law firms in the UK. The research also found, however, that the implied promise envisaged by tournament theory was not the promise monitored by the individuals who took part in the research project.</p>

Getting along to get ahead: The role of social context in tournament promotion and reward systems

Tournament theory posits that some organizations are modeled after sports tournaments whereby individuals are incentivized to compete and win against other members of the organization. A persistent criticism of tournament theory is that rank-order success of employees is entirely dependent on non-interacting or at least non-cooperating entities. To address what part, if any, cooperation plays in competitive tournaments, this study examines the role of social networks in tournament-style promotion and reward systems. Specifically, we seek to identify the importance of social relationships, such as group dissimilarity, initial tie formation, and tie strength in predicting tournament success. Bringing two largely independent research streams together (one focused on cooperation and one framed around competition), we examine how individuals’ performance interacts with their social relationships—their social networks—to influence their chances of winning a tournament. Using the Survivor television series, we analyze the behaviors of 535 interacting contestants across 30 tournaments. In general, the findings help to illustrate how performance and social networks predict tournament advancement. Interestingly, we find that group dissimilarity based on gender, race, and age, largely does not play a role in advancement in the tournaments. Further, the strength of ties fails to mediate between variables such as group dissimilarity and initial tie formation. We conclude by discussing future directions for theoretical and practical exploration of tournament-style promotion systems. Recommendations include continuing to explore and test the role of social dynamics in compensation and promotion systems.

Can TMT vertical pay disparity promote firm innovation performance? The moderating role of CEO power and board characteristics

PurposeBased on the tournament theory and the principal agent theory, this study aims to empirically investigate how top management team (TMT) vertical pay disparity (the pay disparity between the CEO and non-CEO executives) influences firm innovation performance.Design/methodology/approachThis study empirically tested the hypotheses based on a sample of listed high-tech companies in China during the period between 2007 and 2018.FindingsTMT vertical pay disparity promotes innovation performance; CEO power undermines the positive effect of TMT vertical pay disparity on innovation performance; the negative moderating effect of CEO power is mitigated by board age and gender and educational levels, whereas the proportion of female directors has no such effect at any significant level.Originality/valueThis study uniquely contributes to the theoretical and empirical development of tournament theory and the principal agent theory.

Who wins the tug of war? A comparative study of the influence of board power and CEO power on CEO-TMT pay gap

Extant studies theoretically debate and empirically present inconsistent findings of the factors that influence the CEO-TMT pay gap. In this study, we extend the research of the antecedents of the CEO-TMT pay gap by directly comparing different theoretical predictions regarding the impacts of board power and CEO power on the CEO-TMT pay gap. Conducting dynamic panel analyses with GMM estimator on a sample of 2,117 firm-year observations in the S&P 500 between 2006 and 2013, we empirically test the contrasting predictions regarding the relationships among board power, CEO power, board-CEO power imbalance, and the CEO-TMT pay gap. In turn, we find that board power is negatively associated with the CEO-TMT pay gap and CEO power has the opposite effect. Moreover, the stronger board power against CEO power, the smaller the CEO-TMT pay gap becomes. Our theoretical analyses and empirical investigations contribute to the existing theoretical debate among agency theory, tournament theory, and managerial power theory regarding the determinants of the CEO-TMT pay gap. Consistent with agency theory predictions rather than tournament theory ones, our empirical results suggest that boards are conscientious about the potential negative effects of a larger CEO-TMT pay gap and therefore stronger boards usually do not rely on larger CEO-TMT pay gap to incentivize CEOs. This study also contributes to corporate governance literature by offering new aggregated proxies for board power and CEO power which reflect the multidimensional features of board-CEO relationships

Chief Executive Officer Compensation and Financial Performance: Evidence from the Alternative Investment Market in the UK

Purpose: This article investigates the relationship between executive compensation and financial performance for Alternative Investment Market (AIM)-listed firms in the UK. While most studies have looked at the impact of executive compensation on financial performance, this study argues that the issue of reverse causality cannot be ignored even if it is controlled and therefore investigates the extent to which financial performance can also impact on executive remuneration. Design/methodology/approach: The study relies on a sample of 201 AIM-listed firms in the UK from 2011 to 2016 to examine the relationship between executive compensation and financial performance. It draws on agency and tournament theories to model the relationships between executive compensation and financial performance using various panel regression models. Findings: The findings from the study revealed that the chief executive officer (CEO) remuneration impact on both accounting- and market-based measures of financial performance. It also showed that while performance-based incentives like bonus and other long-term incentives linked to performance significantly impact on financial performance, salary, a cash-based non-performance-related compensation rather negatively affects performance. It was also discovered that financial performance can also influence the level of executive compensation and not always vice versa. Value/originality: The study adds novelties to the existing literature by introducing tournament theory to the studies on the relationship between executive compensation and financial performance. Most of the existing studies have been one sided and emphasise only on the influence of executive remuneration on financial performance. However, based on the tournament theory, the study argued that the issue of reverse causality between the two should not be overemphasised even if it is controlled.