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An interview with Zeynep Ton, a professor of practice in the operations management group at MIT Sloan School of Management, about er latest book, The Case for Good Jobs: How Great Companies Bring Dignity, Pay & Meaning to Everyone’s Work.

She believes that leaders can either view their employees as a cost to be minimized, invest little in them and operate with high turnover, or they can see them as drivers of profitability and growth—investing heavily in them, designing their work for high productivity and contribution and therefore operating with low turnover.-- “the good jobs strategy.”

The secret sauce of good jobs strategy is four operational choices—focus and simplify, standardize and empower, cross-train and operate with slack—that improve productivity and contribution and make that higher investment possible.

The competitive costs of low people investment are even higher than the poor operational execution costs.

By making the work better and increasing pay, companies can better attract and keep their talent and enforce high standards, which improve execution and service, uplifting revenue. Few have examined this important topic more closely than Zeynep Ton, a professor of practice in the operations management group at MIT Sloan School of Management, best-selling author of The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits.

The existing literature involving director compensation has been concentrating on its absolute or intrinsic values. Although the relevant studies have generated mixed findings, research in other fields suggests that the power of an incentive may be determined by its value relative to the chosen referencing standard more than its absolute value. This study aims to investigate how relative director pay affects corporate investment efficiency.

This study takes a fresh theoretical viewpoint by framing the investigation using the dimensional comparison theory and proposing that a directorship also presents a relative value that may influence the board’s performance. Ordinary least squared regressions and two-stage system generalised method of moments are used to analyse 14,267 firm-year observations.

The empirical results suggest that the relative director pay is a better estimate of the power of the incentive than the absolute pay. A positive association between the relative director pay and investment efficiency is evident, while the absolute pay has no significant effect on investment decisions. Director overcompensation, however, will cancel out the positive effect of director compensation on investment efficiency. Firms with relatively lower unexpected investment (UI) level benefit the most from an increase in the relative director pay, while neither absolute nor relative director pay affects investment choices in firms with a high UI level because of significantly more overcompensation.

To the best of the authors’ knowledge, this study is the first attempt to investigate the effect of relative director pay. It is also the first to examine the role of dimensional comparison in strategic decisions which is the single untended comparison framework in the director pay design. The current director pay structure has emphasised social and temporal equality by standardising the pay structure and vesting the equity-based pay over a long period. Yet it ignores the fact that people decide their commitment level by comparing the reward with an internal referent too. The findings speak to the dimensional comparison theory in that the inequality emanated from dimensional or internal comparison may be accentuated by the perceived equality in other comparison frameworks, driving the different performances in the roles one assumes.

Using various proxies for the firms' return on equity (ROE) and retention ratios (b) the authors calculate 36 sustainable growth rates, on a rolling basis, for a comprehensive set of firms over a 52-year period. The authors then assess the ability of these different sustainable growth rates to predict the actual, out-of-sample, five-year growth rates of the firms' earnings.

The authors compare the forecast to determine which method of estimating ROE and b produce the lowest mean-squared-errors and then determine the estimation method that works best for firms with different characteristics and for firms in different industries.

Overall, using the median ROE of all firms in the market and the 5-year average of the specific firm's retention ratio produces the lowest, statistically significant, forecast errors. Variations are documented based on firm characteristics, including dividend payout, level of ROE and industry.

The findings can guide practitioners in using the best earnings forecasting method.

Financial textbooks seem universally to suggest that one method of estimating the growth rate of a firm's earnings is to calculate the “sustainable growth rate” by multiplying the firm's ROE by the firm's b. At the same time, multiple methods of proxying for both ROE and b have been suggested; therefore, it is an interesting and useful empirical question, which, heretofore, has not been addressed in the literature, as to which estimation of the sustainable growth rate best approximates the actual future growth of the firm's earnings. The findings can guide practitioners in using the best earnings forecasting method.

Much prior work involving director incentives and corporate behaviour has been focussing on their absolute dollar value or the intrinsic value and generated mixed findings. Comparison theories, however, suggest that the relative value of an incentive may be the main drive for individual performance. This study attempts to investigate the role of director relative pay in promoting the board’s intervention with unrelated diversification decisions.

The analysis uses data from firms operating in more than one segment during the period from 1999 to 2019. Data were obtained from WRDS databases. Ordinary least squares (OLS) regression analysis and the two-stage system generalized method of moments (GMM) were run to test the hypotheses. To test the robustness of the findings, alternative proxies for the key independent variables were used in separate analyses.

The results support the hypothesis that unrelated diversification negatively impact firm performance, while higher director relative pay will help reduce unrelated business diversification. The absolute director pay, however, has no significant impact on corporate strategic choices. The results also highlight the moderating effect of director overcompensation. Director overcompensation will cancel out the impact of relative director pay on unrelated diversification.

This study takes a fresh theoretical perspective by framing the investigation using the dimensional comparison theory to address the single untended comparison framework in the director pay structure – the intra-individual framework. It is the first to investigate the role of director relative pay in corporate strategic choices. The findings support the contention that the relative value of the incentive is an important indicator of the effectiveness of the pay.

This study investigates the empirical association between environmental, social and corporate governance (ESG) performance and top executive compensation in the US financial services industry. Considering that financial firms can inflict systemic shocks across the economy, it has been argued that they must conduct ethical and sustainable business in accordance with ESG principles. This study examines whether ESG efforts are beneficial to managers.

The authors use CEO compensation and ESG performance ratings data for all US financial firms (SIC 6000–6799) from 2015 to 2019. Employing fixed effects regressions, the authors test whether lagged ESG performance is related to CEO compensation, after controlling for other firm characteristics such as size, financial performance, leverage and CEO stock ownership.

The authors find that lagged ESG ratings are strongly associated with all forms of compensation. An increase of one standard deviation in the composite ESG rating is associated with a 14%–16% increase in the total pay. Among the three ESG pillars, only S (social) and G (governance) exhibit persistent and significant associations with both short- and long-term executive pay. The authors also document the significant moderating effects of ESG on the relationships among firm performance, size, leverage, ownership and executive pay, identifying how ESG is associated with compensation.

The authors conclude that managers receive ESG incentives implicitly and explicitly. The novel finding of direct and indirect associations between ESG and top executive compensation contributes to the growing ESG literature on the financial sector and ongoing debate about the explicit inclusion of ESG targets in compensation design.

This paper aims to investigate the effect of governance mechanisms and firm performance on chief executive officer (CEO) compensation in relation to the Jordanian business environment. This study also examines the moderating role of gender diversity.

The sample is drawn from the annual reports of 68 Jordanian firms between 2015 and 2019. This paper uses the ordinary least square regression. It also uses the generalised method of moments approach to control any endogeneity issue and analyses the data in depth. In addition, it uses a dynamic model to address concerns regarding causality in the study’s models.

The results show that governance mechanisms and firm performance have an impact on CEO compensation. Furthermore, the outcomes indicate that gender diversity significantly and positively moderates the association between firm performance and CEO compensation. These findings enhance and support agency theory in the context of Jordan.

The study’s results have significant implications for policymakers, shareholders, investors, academicians and the public in the developing Jordanian market. The findings also support more monitoring and inspection to prevent the occurrence of opportunistic management behaviour and ensure that CEO remuneration packages are appropriately designed.

This study provides a unique understanding by explaining the impact of governance and performance on CEO compensation in a developing country such as Jordan. Besides that, the current study extends prior studies in Jordan significantly.

After the decision of the Egyptian government to adhere to the Equal Pay International Coalition in 2020, a great deal needs to be done to guarantee ‘equal pay for equal work’. The authors provide a comprehensive, in-depth, up-to-date analysis of the gender wage gap in Egypt, as well as its evolution over the last 20 years, disaggregated by public and private sector. The authors also provide an analysis of the cultural determinants of Egypt's low female participation.

The authors apply the Oaxaca-Blinder decomposition (with sample selection) to assess the gender wage gap at the mean of the wage distribution in the public and private sector. The authors also implement a re-centred influence function decomposition to assess the extent of ‘discrimination’ along the wage distribution in both sectors. An inverse-probability-weighted regression adjustment procedure is used to assess the joint impact of gender and firm-ownership. A female participation equation taking into account gender equality attitude is provided.

The authors find a sizable and increasing gender wage gap in the private sector almost entirely due to ‘discrimination’. The authors also find evidence of a sticky floor in the private sector and a glass ceiling in the public one. Cultural barriers play a major role in determining female participation.

This is the first paper on the evolution of gender equality in Egypt that takes into account the effect of the 'Arab Spring’ of 2011. To the best of the authors’ knowledge, this is also the first time that an IPWRA procedure is applied to study the interaction effect of gender and firm-ownership.

This study explores the psychological determinants of buy-now-pay-later (BNPL) use in the UK and reviews the efficacy of existing payment constructs.

A total of 533 BNPL users engaged in story stem completion. Template analysis was used, supported by the identification of four BNPL sentiment groups to enable comparison.

Whilst positive attitudes towards BNPL dominate, other psychological determinants are apparent to a varied extent. Psychological distance and ownership of borrowed money are redolent, while transparency and transaction convenience are less appreciable. BNPL users understand temporality beyond its current conceptualizations. Some users construe BNPL as a “savings” product, and hence payment format conceptualizations may be erroneous. Those with a positive sentiment foreground BNPL’s consumption and budget management benefits. However, the potential for unintended consequences is manifest across all users.

The potentially unwanted consequences, or dark side, of BNPL use in the UK are highlighted. The specified constructs, whilst helpful, do not particularize the complex interconnected nature of the psychological determinants of BNPL use. Improved conceptualization offering richness and clarity is needed – temporality specifically requires consideration.

Users’ sophistication and misunderstanding are both evident, necessitating fuller conversations among various stakeholders, including, providers, policymakers, consumers and advocacy groups.

This research advances the scarce literature exploring consumers’ BNPL use determinants and challenges current conceptualizations surrounding payment format perceptions.

The purpose of this exploratory study was to examine the workplace experiences of current and former underrepresented ticket sales employees.

The study utilized survey methodology to answer the research questions. Purposive sampling was used to identify potential respondents: individuals who were either currently employed as sport ticket sales employees or had been previously. The researchers examined online media guides from North American major league sports teams and identified ticket sales representatives who were compiled into a database and then cross-referenced through social media platform LinkedIn. Individuals were located via LinkedIn profiles and sent an anonymous, electronic survey which included a combination of Likert scale and open-ended questions regarding respondent experiences working in ticket sales departments.

Survey responses from 511 ticket salespeople revealed negative experiences related to management and career advancement opportunities, as well as significant differences in negative experiences for underrepresented populations regarding mentorship and culture.

Sport sales managers desire to expand employee diversity (Wells et al., 2019) and improve overall retention rates, but if a clear understanding of organizational vision toward diversification is not established within sports teams, managers are less likely to embrace diversity initiatives. Thus, it is imperative to understand the lived experiences of underrepresented ticket salespeople in order to improve workplace culture and effectiveness.

After completion of this case study, students/managers will be able to analyze reasons for the labor unrest at Wistron Corporation’s Indian manufacturing plant; examine the implementation of labor regulations applicable to the employment of contract workers by Wistron Corporation; infer the problems associated with rapid expansion in the workforce; analyze the labor regulatory challenges faced by Wistron Corporation; and demonstrate problem-solving skills.

The focus of this case study was the crisis faced by Apple’s contract manufacturer  –  Wistron Corporation due to labor unrest, riots and violence in its production facility located near Bangalore in India. This case study discussed the CEO’s dilemma in resolving the crisis and regaining the confidence of stakeholders, namely, the contract employees, Apple Inc. and the State Government of Karnataka. To give the readers an overview of the crisis – this case discussed in detail the underlying reasons for the labor unrest such as a rapid increase in manpower, unilateral increase in working hours without extra pay, unjustified pay cuts, understaffed and underqualified human resources (HR) department, ill-equipped attendance and payroll system. It also gave an overview of mistakes in labor management that could be avoided by a manufacturing firm. The case also discussed the pressure faced by the Wistron CEO due to probation and a new business freeze by Apple Inc. This case study is suitable for understanding the complexities of labor laws and the legal complications that can arise when a corporation disregards local labor laws while operating in foreign countries.

The case is best suited for postgraduate and executive MBA students studying labor law, industrial psychology and HR management in commerce and business management streams. The authors suggest that the instructor should inform students to read the case study before attending the 90-min session. It can be executed in the classroom after discussing the theoretical concepts.

Teaching notes are available for educators only.

CSS 6: Human Resource Management.