Breach Penalties in Labour Contracts: Advance Notice and Severance Pay

This paper analyses the determining factors of advance notice and severance pay provisions that appear in collective bargaining agreements. The theoretical model constructed is a simple bargaining model in which advance notice and severance pay play the role of breach penalties that the firm must pay for breaking the employment relationship. The hypotheses are tested on data gathered from collective bargaining agreements from different industries that were signed between 1970 and 1989.     

The Effect of Earnings‐Based Metrics on Vertical Efficiency

The tendency to rely on accounting earnings as the primary metric of corporate performance has been subject to criticism in recent times. A key concern is that earnings misrepresent changes in value in that cash outlays occur upfront but expenses are recognized only over time. While recognized expenses indeed add up to the initial cash outflow, the equality holds only in undiscounted (nominal), not discounted (real), terms. Accordingly, corporate earnings figures suffer from a form of money illusion. In this paper, we demonstrate that such money illusion can have an upside when it is present in vertical relationships subject to self‐interest. In particular, a buyer who focuses on earnings has incentives to increase purchases since it does not immediately encounter the full cost of cash outflows. These added incentives can promote more efficient trade. We also show that the increased incentives to buy can also lead to Pareto improvements by spurring the supplier to invest more in developing technology. Finally, we demonstrate that judiciously chosen inventory valuation rules can lead to efficient supply chain outcomes. Thus, efficiency can be achieved when supply chain parties freely trade and regulators specify only the accounting rules under which they operate.     

All‐Pay Contests

This paper studies a class of games, “all‐pay contests,” which capture general asymmetries and sunk investments inherent in scenarios such as lobbying, competition for market power, labor‐market tournaments, and R&D races. Players compete for one of several identical prizes by choosing a score. Conditional on winning or losing, it is weakly better to do so with a lower score. This formulation allows for differing production technologies, costs of capital, prior investments, attitudes toward risk, and conditional and unconditional investments, among others. I provide a closed‐form formula for players' equilibrium payoffs and analyze player participation. A special case of contests is multiprize, complete‐information all‐pay auctions.     

A Simple Model of Severance Pay Determination: The Case of Individual Dismissals in Spain

In this article we model the determinants of severance pay for individual dismissals in Spain, following an idea proposed by Jimeno and Toharia (Economistas 55: 243–255, 1993). We point out the importance of severance pay settled before judgment, since the legal framework creates a bargaining space to determine the amount paid by firms in cases of individual dismissal. The model is a simple pre‐trial bargaining game between the firm and the worker. It predicts a higher settled severance pay for dismissals on economic grounds than on disciplinary ones, which could explain the perceptions held about the wide use of disciplinary dismissals in Spain. In addition, this approach could be useful in designing labour market reforms aimed at changing dismissal costs, because it allows us to determine the key variables affecting settled severance pay. Our simple model predicts that the key variables for Spain are the severance pay for unfair dismissal and the probability of unfair dismissal.     

Multi‐Echelon Inventory Management under Short‐Term Take‐or‐Pay Contracts

We extend the Clark–Scarf serial multi‐echelon inventory model to include procuring production inputs under short‐term take‐or‐pay contracts at one or more stages. In each period, each such stage has the option to order/process at two different cost rates; the cheaper rate applies to units up to the contract quantity selected in the previous period. We prove that in each period and at each such stage, there are three base‐stock levels that characterize an optimal policy, two for the inventory policy and one for the contract quantity selection policy. The optimal cost function is additively separable in its state variables, leading to conquering the curse of dimensionality and the opportunity to manage the supply chain using independently acting managers. We develop conditions under which myopic policies are optimal and illustrate the results using numerical examples. We establish and use a generic one‐period result, which generalizes an important such result in the literature. Extensions to cover variants of take‐or‐pay contracts are included. Limitations are discussed.     

The Impact of Investor Horizon on Say‐on‐Pay Voting

Shareholder investment horizons have a significant impact on say‐on‐pay voting patterns. Short‐term investors are more likely to avoid expressing opinion on executive pay proposals by casting an abstaining vote. They vote against board proposals on pay only in cases where the CEO already receives excessive pay levels. In contrast, long‐term investors typically cast favourable votes. According to our findings, this is due to effective monitoring rather than collusion with the management. Overall, investor heterogeneity in terms of investment horizons helps explain say‐on‐pay voting, in particular the low levels of say‐on‐pay dissent, which have recently raised questions over the efficiency of this corporate governance mechanism .     

Severance Payments and Firm–specific Human Capital

What effect does employment protection through severance payments have on the behaviour of employed workers? We analyse this issue within a stochastic two–period framework where workers decide on human capital investments and find two competing effects: severance payments imply higher job security that fosters human capital formation. At the same time, a lay–off is perceived by the workers to be a weaker penalty if severance payments are provided. This incentive lowers their optimal amount of firm–specific investments. Which effect prevails on balance depends on the distribution of investment returns among firm and workers. For strong positive reactions, employment protection is also in the interests of the firm.     

It’s Not What You Pay it’s the Way that You Pay it and that’s What Gets Results: Jockeys’ Pay and Performance

Management scholars and economists have recently set out the requirements of a system to elicit good performance when it is necessary to align the interests of the principal and agent. We analyse pay and performance in an occupation — jockeys — replete with moral hazard possibilities. We are able to do this because, most unusually, a measure of pure individual performance exists for an unbalanced panel of some 50 individuals for 8 years. Three hypotheses are tested. First, in line with classic agency theory, we expect monitoring mechanisms and incentive contracts to be used to align the interests of principals and agents. Second, pay and performance should be positively associated, subject to the first hypothesis being confirmed. Third, a limited number of jockeys were paid via an alternative mechanism involving very large non-contingent retainer fees. This serves as our counterfactual payment system. In line with agency theory we expect worse performance under such a system than under an incentive contract. The three hypotheses are confirmed: incentive contracts generate superior performance to non-contingent payment systems. Our evidence suggests that ‘it’s not what you pay it’s the way that you pay it … and that’s what gets results’. It is maddening that society confers its blessings on traditional academic pursuits but views the study of horseracing as utter frivolity (Beyer, 1983).     

Diminishing Willingness to Pay per Quality‐Adjusted Life Year: Valuing Acute Foodborne Illness

We design and conduct a stated‐preference survey to estimate willingness to pay (WTP) to reduce foodborne risk of acute illness and to test whether WTP is proportional to the corresponding gain in expected quality‐adjusted life years (QALYs). If QALYs measure utility for health, then economic theory requires WTP to be nearly proportional to changes in both health quality and duration of illness and WTP could be estimated by multiplying the expected change in QALYs by an appropriate monetary value. WTP is elicited using double‐bounded, dichotomous‐choice questions in which respondents (randomly selected from the U.S. general adult population, n = 2,858) decide whether to purchase a more expensive food to reduce the risk of foodborne illness. Health risks vary by baseline probability of illness, reduction in probability, duration and severity of illness, and conditional probability of mortality. The expected gain in QALYs is calculated using respondent‐assessed decrements in health‐related quality of life if ill combined with the duration of illness and reduction in probability specified in the survey. We find sharply diminishing marginal WTP for severity and duration of illness prevented. Our results suggest that individuals do not have a constant rate of WTP per QALY, which implies that WTP cannot be accurately estimated by multiplying the change in QALYs by an appropriate monetary value.     

On the Use of Incentive Pay in Chinese State‐owned Enterprises: The Role of Hierarchy

Abstract. This paper looks at the wage system in Chinese state‐owned enterprises (SOEs) during the 1980s. While wages remained compressed, there is evidence for the use of incentive mechanisms. Wages were quite sensitive to firm performance, especially at higher levels of the hierarchy. One of the reform measures — the Internal Salary System, a system of intra‐firm contracts — has contributed significantly to this sensitivity. There is also some direct evidence that it enhanced the effectiveness of the bonus system, and that it helped to increase productivity. This goes towards explaining how the Chinese bonus system was able to overcome the free‐rider problems typical of team compensation.     

The Price Chameleons Pay: Self‐monitoring,Boundary Spanning and Role Conflict in the Workplace*

The vast majority of research on self‐monitoring in the workplace focuses on the benefits that accrue to chameleon‐like high self‐monitors (relative to true‐to‐themselves low self‐monitors). In this study, we depart from the mainstream by focusing on a potential liability of being a high self‐monitor: high levels of experienced role conflict. We hypothesize that high self‐monitors tend to choose work situations that, although consistent with the expression of their characteristic personality, inherently involve greater role conflict (i.e. competing role expectations from different role senders). Data collected from a 116‐member high‐tech firm showed support for this mediation hypothesis: relative to low self‐monitors, high self‐monitors tended to experience greater role conflict in work organizations because high self‐monitors were more likely to occupy boundary spanning positions. To help draw a more realistic and balanced portrait of self‐monitoring in the workplace, we call for more theoretically grounded research on the price chameleons pay.     

Voluntary Work‐related Technology Use during Non‐work Time: A Narrative Synthesis of Empirical Research and Research Agenda

The Internet and mobilization of information and communication technologies (ICTs) have made non‐manual work increasingly portable and remotely accessible. As a result, a considerable number of employees use their ICTs to engage in work‐related tasks during designated non‐work time, even without contractual obligation. However, existing research on such voluntary work‐related ICT use remains fragmented and spread across disciplines. The authors conducted a narrative review of 56 studies to identify themes in existing research, synthesize the evidence base and identify gaps in understanding. They identify five themes: (1) Social‐normative organizational context, (2) Job‐related characteristics and work processes, (3) Person characteristics, (4) Designated non‐work time and well‐being, and (5) Empowerment/Enslavement Paradox. A conceptual model of voluntary ICT use is developed by integrating the identified themes with existing organizational research, outlining the relationships between the identified themes and voluntary ICT use. The discussion emphasizes the need for more conceptual clarity on voluntary ICT use and related constructs, and for the integration of different disciplines and methodological approaches to advance knowledge in the field. The authors further identify person‐centred research as a critical future avenue to explore different ICT user types. Additionally, more research into the mechanisms and moderating influences regarding voluntary ICT use and its outcomes is considered advisable to advance knowledge on the Empowerment/Enslavement Paradox and its potential resolution. The paper concludes with preliminary implications to inform practice, addressing the need for employers to provide control over voluntary ICT use and employees enacting this control.     

Sickness Absence,Sick Leave Pay,and Pay Schemes

Utilizing Norwegian linked register and survey data, while exploiting a discontinuity in public sick pay legislation, I show that the public sick pay compensation level causally affects male performance pay workers' sick leave days. Both male and female performance pay workers experience longer sick leaves when provided private supplementary sick pay compared with those being eligible for public sick pay only. This differential impact of the replacement rate on workers' sick leave rates reveals heterogeneous behavioural changes following public sick pay cuts, and this heterogeneity will be reinforced by the provision of employer‐provided sick pay to attractive worker groups.     

Quality‐related Action Programs: Their Impact on Quality Performance and Firm Performance

From analyses of the direct effects of 10 quality action programs on six firm performance outcomes, as well as their indirect effects through eight quality performance dimensions, two routes from action programs through quality performance to firm performance in the automotive supply industry are identified. The first is the product quality route, whose landmarks are superior quality performance on Conformance and Design Quality dimensions; the second is the relationship quality route, with superior Customer Responsiveness and Service. Both the product quality and the relationship quality routes lead to superior ROI; the former also leads to enhanced ROA, and the latter to enhanced market share performance. Associated key action programs are Committed Leadership, Cross‐Functional Quality Teams, Employee Empowerment, Supplier Development, and Closer Customer Relationships. The first three are internally focused, while the latter two are boundary‐spanning supply chain programs.     

Self-Solicited Feedback: Effects of Hourly Pay and Individual Monetary Incentive Pay

The frequency of feedback solicitation under hourly pay and individual monetary incentive pay conditions was examined. A between-subjects design was used with 30 college students in the two groups. Participants attended three experimental sessions and entered the cash value of simulated bank checks presented on a computer screen. Performance was higher for individuals who were paid incentives; however, participants who were paid incentives did not self-solicit feedback more than those who were paid hourly. Rather, participants in both groups solicited feedback quite frequently. Additionally, performance was not related to feedback solicitation. These results suggest that the incentives did not make feedback more reinforcing even though the incentives were functional rewards and the feedback was correlated with the amount of pay earned: the better the feedback, the more pay participants earned. The results also support the position that it may be necessary to pair objective feedback with an evaluative component to enhance performance.     

Remuneration Committees,Pay Consultants and the Determination of Executive Directors' Pay

This paper explores how Board Remuneration Committee (Remco) decisions about executive pay are influenced by pay consultants. Drawing on resource dependency theory and case study evidence from five companies, the paper illuminates the complexities of the pressures and processes confronting both Remcos and pay consultants in the determination of executive pay awards. In contrast to ‘managerial power’ arguments, it demonstrates that the Remcos are proactive in managing pay policy, conscientious in seeking to ensure that pay is appropriate and not over‐generous, and that pay consultants are independent and take their instructions entirely from the Remco. Nevertheless, Remcos' understandings of the wider pay environment, informed by the comparative data supplied by pay consultants, constructs a climate in which the Remcos come to perceive a need for periodic upward pay adjustments to ensure that executive remuneration is consistent with external benchmarks if they are to avoid recruitment and retention problems.     

The Contingent Effects of Role Ambiguity and Role Novelty on Expatriates' Work‐related Outcomes

Research on work stress has highlighted its negative outcomes for both individuals and their employers. Overseas assignments are more stressful than domestic assignments, and their relatively high failure rates are well documented. We suggest, however, that certain types of stress can positively affect expatriate performance. Based on role theory and the distinction between hindrance and challenge stressors, we develop hypotheses regarding the influence of role ambiguity and role novelty on expatriate success. We also conceptualize and empirically investigate the moderating influence of expatriates' perceptions of organizational support and supervisor support. Our hypotheses are tested using a sample of 125 Japanese expatriate managers in Germany. We find that role ambiguity is a hindrance stressor and negatively affects job satisfaction and work adjustment, while role novelty acts as a challenge stressor and positively affects job satisfaction, task performance and work adjustment. Our findings also show that perceived organizational support attenuates the negative effects of role ambiguity on work adjustment and strengthens the positive effect of role novelty on job satisfaction. We also find that supervisor support positively moderates the positive effect of role novelty on job satisfaction and work adjustment.     

绩效工资强度对员工薪酬满意度影响的实证研究

以14家企业的506份薪酬满意度问卷及其客观薪酬数据为样本,以SPSS13.0软件为工具,采用曲线估计和分层多元回归分析探讨绩效工资强度对员工薪酬满意度的影响,以及职位层次对这一关系的调节作用.研究结果表明,绩效工资强度与薪酬满意度之间呈倒U型关系,职位层次对这一关系具有调节作用.最后,讨论了对企业薪酬管理实践的指导意义以及该领域未来的研究方向.     

Green supply‐chain management: A state‐of‐the‐art literature review

There is a growing need for integrating environmentally sound choices into supply‐chain management research and practice. Perusal of the literature shows that a broad frame of reference for green supply‐chain management (GrSCM) is not adequately developed. Regulatory bodies that formulate regulations to meet societal and ecological concerns to facilitate growth of business and economy also suffer from its absence. A succinct classification to help academicians, researchers and practitioners in understanding integrated GrSCM from a wider perspective is needed. Further, sufficient literature is available to warrant such classification. This paper takes an integrated and fresh look into the area of GrSCM. The literature on GrSCM is covered exhaustively from its conceptualization, primarily taking a ‘reverse logistics angle’. Using the rich body of available literature, including earlier reviews that had relatively limited perspectives, the literature on GrSCM is classified on the basis of the problem context in supply chain's major influential areas. It is also classified on the basis of methodology and approach adopted. Various mathematical tools/techniques used in literature vis‐à‐vis the contexts of GrSCM are mapped. A timeline indicating relevant papers is also provided as a ready reference. Finally, the findings and interpretations are summarized, and the main research issues and opportunities are highlighted.     

No‐Betting‐Pareto Dominance

We argue that the notion of Pareto dominance is not as compelling in the presence of uncertainty as it is under certainty. In particular, voluntary trade based on differences in tastes is commonly accepted as desirable, because tastes cannot be wrong. By contrast, voluntary trade based on incompatible beliefs may indicate that at least one agent entertains mistaken beliefs. We propose and characterize a weaker, No‐Betting, notion of Pareto domination which requires, on top of unanimity of preference, the existence of shared beliefs that can rationalize such preference for each agent.