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Article
Publication date: 1 March 2006

Deborah Allcock and Christopher Pass

The purpose of this paper is to use a sample of UK entrepreneurial initial public offering (IPO) companies to investigate whether they change their compensation strategies

Abstract

Purpose

The purpose of this paper is to use a sample of UK entrepreneurial initial public offering (IPO) companies to investigate whether they change their compensation strategies as they undertake the crucial transformation of the business from private to public status.

Design/methodology/approach

The paper uses the agency perspective to underpin an examination of the changes within the compensation packages of companies at the stage of the initial public offering, particularly with regard to the use of executive director incentive schemes, and compares this to “best practice” guidelines issued within the UK.

Findings

The paper discovers that even though incentive schemes are adopted, the majority are unconditional and requiring only an improvement in share price and the executive to remain employed in order for gains to be made. The general finding is that before IPO most companies did not have an incentive pay scheme in place, and those that did, operated unconditional option schemes. However, after IPO most companies introduced an incentive pay scheme, but the majority were unconditional rather than conditional (i.e. schemes requiring executives to meet pre‐determined performance criteria – as recommended by “best practice” guidelines).

Originality/value

The paper exposes that, contrary to “best practice” guidelines and regulations, many of these schemes reward executives unconditionally with the only factor being them remaining in employment over the vesting period. Despite “best practice” and regulations, firms still appear to be defensive and protect the executives from rigorous scrutiny by shareholders.

Details

Corporate Governance: The international journal of business in society, vol. 6 no. 2
Type: Research Article
ISSN: 1472-0701

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Book part
Publication date: 9 December 2013

Philip Mellizo

Group incentive schemes have been shown to be positively associated with firm performance but it remains an open question whether this association can be explained by the…

Abstract

Purpose

Group incentive schemes have been shown to be positively associated with firm performance but it remains an open question whether this association can be explained by the motivating characteristics of the group-incentive scheme itself, or if this is due to factors that tend to accompany group-incentive schemes. We use a controlled experiment to directly test if group-incentive schemes can motivate sustained individual effort in the absence of rules, norms, and institutions that are known to mitigate free-riding behavior.

Design/methodology/approach

We use a controlled lab experiment that randomly assigns subjects to one of three compensation contracts used to incentivize an onerous effort task. Two of the compensation contracts are group-incentive schemes where subjects have an incentive to free-ride on the efforts of their coworkers, and the third (control) is a flat-wage contract.

Findings

We find that both group-incentive schemes resulted in sustained, higher performance relative to the flat-wage compensation contract. Further, we do not find evidence of free-riding behavior under the two group-incentive schemes.

Research limitations/implications

Although we do find sustained cooperation/performance over the three work periods of our experiment under the group-incentive schemes, further testing would be required to evaluate whether group-incentive schemes can sustain cooperation over a longer time horizon without complementary norms, policies, or institutions that mitigate free-riding.

Originality/value

By unambiguously showing that group-incentive schemes can, by themselves, motivate workers to provide sustained levels of effort, this suggests that the “1/n problem” may be, in part, an artifact of the rational-actor modeling conventions.

Details

Sharing Ownership, Profits, and Decision-Making in the 21st Century
Type: Book
ISBN: 978-1-78190-750-4

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Article
Publication date: 20 October 2020

Lufi Yuwana Mursita and Luciana Spica Almilia

This study aims to examine the causal relationship of subjective incentive schemes on counterproductive knowledge behavior. Besides, this study also identifies the…

Abstract

Purpose

This study aims to examine the causal relationship of subjective incentive schemes on counterproductive knowledge behavior. Besides, this study also identifies the moderating role of cognitive orientation on the relationship between those two variables.

Design/methodology/approach

This study used a 2 × 2 between-subjects laboratory experiment with accounting undergraduate students as the subjects.

Findings

Subjective-based incentive schemes reduce the tendency for counterproductive knowledge behavior. Also, the collectivist cognitive orientation negatively influences the behavior. However, cognitive orientation does not act as a moderator in the causal relationship of incentive schemes and counterproductive knowledge behavior.

Originality/value

To the best of the authors’ knowledge, this study is the first that investigates and finds the effect of inclusion of subjectivity in incentive schemes and the level of individual’s collectivism on the reluctance to share knowledge in the workplace. This study has also strived to reduce an overlapping between the concept of knowledge sharing and counterproductive knowledge behavior by applying the right basic concept during the experiment.

Details

International Journal of Ethics and Systems, vol. 37 no. 1
Type: Research Article
ISSN: 2514-9369

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Article
Publication date: 1 January 2003

FAYEZ A. ELAYAN, JAMMY S.C. LAU and THOMAS O. MEYER

Incentive‐based executive compensation is regarded as a mechanism for alleviating agency problems between executives and shareholders. Seventy‐three New Zealand (NZ…

Abstract

Incentive‐based executive compensation is regarded as a mechanism for alleviating agency problems between executives and shareholders. Seventy‐three New Zealand (NZ) listed companies are used to examine the relationship between executive incentive compensation schemes (ICS) and firm performance. The results suggest that neither compensation level nor adoption of an ICS are significantly related to returns to shareholders or ROA. However, there is a statistically significant relationship between Tobin's q and both CEO compensation and executive share ownership. Further, the evidence suggests the recent compensation disclosure requirements in NZ are not yet stringent enough to allow adequate analysis of the link between ICSs and corporate performance.

Details

Studies in Economics and Finance, vol. 21 no. 1
Type: Research Article
ISSN: 1086-7376

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Book part
Publication date: 18 December 2016

Fanzheng Yang

This paper is a study of how people with heterogonous individual characteristics self-select into different compensation schemes. A laboratory experiment is designed in…

Abstract

This paper is a study of how people with heterogonous individual characteristics self-select into different compensation schemes. A laboratory experiment is designed in which “workers” can join “companies” that pay according to various schemes: piece rate, revenue sharing, individual tournament, and team tournament. The main findings are: (1) Subjects with high relative performance always prefer individual tournament. (2) Risk-averse subjects are less likely to choose competitive schemes. (3) Individual tournament attracts fewer women than men, which is partially explained by gender-specific social preferences. (4) Compared to people with siblings, only children are less likely to accept any team-based schemes without information about their teammates. (5) The provision of feedback about relative performance can adjust individuals’ biased self-beliefs and then influence their self-selections.

Details

Experiments in Organizational Economics
Type: Book
ISBN: 978-1-78560-964-0

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Article
Publication date: 9 January 2017

Christian Daude, Hamlet Gutierrez and Angel Melguizo

Tax incentives can be a useful tool to stimulate investment in developing countries. However, interest groups often are able to exert considerable influence in its…

Abstract

Purpose

Tax incentives can be a useful tool to stimulate investment in developing countries. However, interest groups often are able to exert considerable influence in its management, if not its design. The purpose of this paper is to use a power-based approach to the political economy of tax reform to analyse the case of tax incentives for investment in the Dominican Republic. Based on original interviews and a detailed analysis of regulations, the authors study how interest groups work within the institutional framework to seek outcomes that best fit their objectives. However, when unsuccessful, they become powerful advocates of change. These power dynamics have important implications for the design and management of tax incentives in the Dominican Republic and in other developing economies.

Design/methodology/approach

Case study based on informed interviews with policy makers, lobbyists and researchers combined with statistical and administrative information to test the main hypotheses.

Findings

While the role of influence groups in creating tax schemes has been widely studied, the authors show that these groups can also have an important role in the administration of the regime and making it more or less open to modifications. The paper shows that the capture of investment incentives has rendered the tax system rigid and unstable in the Dominican Republic, subjecting the public interest hostage to the gain of few.

Research limitations/implications

Therefore, there is a need to review and reform tax policy, not just from a technical viewpoint, but more importantly altering the political arrangements. More transparency in assessing the impact of these schemes, disclosing information of who has access to tax exemptions and budgeting the tax expenditures can also be tools to increase public control over these instruments. Also, making it more difficult to grant tax incentives, for example by asking for an ex-ante justification and quantification of the externalities supposedly being created would reduce the abuse by power groups of these instruments. Without more balanced and independent leadership, it would be extremely difficult to advance in these fields.

Originality/value

The literature on the political economy of tax incentives normally focuses on how key actors work around the institutional framework to solve conflict of interests. This paper addresses a complementary – and in the viewpoint equally relevant – aspect of the political economy of tax incentives: once enacted, vested interests have a particular motivation to keep the incentives in place, and therefore the authors should understand how key actors work from within the institutional framework to seek the outcomes that better suit their interests. The analysis focuses on Dominican Republic, based on official data and additional in-depth interviews with policy makers, entrepreneurs and consultants that assist firms with tax and regulation issues.

Details

Journal of Economic Studies, vol. 44 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 December 1964

THERE have been official links for the past twelve years between the Institute of Incorporated Work Study Technologists and Time and Motion Study. Many of its members have…

Abstract

THERE have been official links for the past twelve years between the Institute of Incorporated Work Study Technologists and Time and Motion Study. Many of its members have been valued contributors to our pages and the Institute has had editorial space for its news.

Details

Work Study, vol. 13 no. 12
Type: Research Article
ISSN: 0043-8022

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Book part
Publication date: 9 November 2017

Sizwe Timothy Phakathi

This chapter examines and discusses the unintended outcomes of the production bonus scheme the mine had instituted to motivate and increase the productivity of the…

Abstract

This chapter examines and discusses the unintended outcomes of the production bonus scheme the mine had instituted to motivate and increase the productivity of the frontline mining teams. This is crucial given that the maladministration of the bonus system could lead to a range of undesired outcomes such as deteriorating levels of trust between management and frontline workers, prioritisation of production at the expense of safety, poor work relations and ultimately low levels of organisational, employee and team performance. There are a number of organisational, management and labour factors that can render a production bonus scheme effective or ineffective. These factors influence the nature and extent of worker reactions to the bonus scheme.

This chapter examines and discusses the factors that influenced the reaction of the mining teams to the team-based production bonus scheme and the extent to which mine management fulfilled its side of the bargain in the implementation of the production bonus. The chapter highlights the manner in which the team-based bonus system influenced teams of stope workers to engage in their informal organisational practice of making plan (planisa) in order to offset the snags that jeopardised their prospects of earning the production bonus. The chapter reveals that, to a large extent, the productivity bonus generated conflict rather than cooperation at the point of production down the mine. As a result, the incentive scheme failed to live up to expectations by not eliciting the desired levels of organisational, worker and team performance at the rock-face.

Details

Production, Safety and Teamwork in a Deep-Level Mining Workplace
Type: Book
ISBN: 978-1-78714-564-1

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Article
Publication date: 1 February 1990

Miriam Dornstein

It is widely agreed that employees’ attitudestowards pay incentives are an importantdeterminant of their effectiveness. The perceivedfairness of pay incentives and their…

Abstract

It is widely agreed that employees’ attitudes towards pay incentives are an important determinant of their effectiveness. The perceived fairness of pay incentives and their determinants are examined. Based on theories dealing with the fairness evaluation of rewards, a number of hypotheses are formulated proposing that employees’ judgements of the fairness of pay incentives will be partly determined by their attitudes towards work and certain situational and personal background factors. The findings generally support these hypotheses. They indicate that the fairness judgements of pay incentive schemes and the considerations underlying such judgements are determined, among other things, by work motivation and by personal background characteristics such as age, education, number of dependants, organisational tenure and country of origin.

Details

Personnel Review, vol. 19 no. 2
Type: Research Article
ISSN: 0048-3486

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Article
Publication date: 22 February 2008

Min‐Hui Foo, Gary Douglas and Mervyn A. Jack

The purpose of this paper is to show that new technologies have significantly changed the way that customers interact with their bank. Whilst a trip down to the local…

Abstract

Purpose

The purpose of this paper is to show that new technologies have significantly changed the way that customers interact with their bank. Whilst a trip down to the local branch was mandatory in the past for a customer to do their banking, all that is required now in many situations is simply to send a text message or log on to the internet. However, the idea of exploiting customer competency with new technologies to create new distribution channels has become a double‐edged sword. Although the distance between the bank and its customer is shortened in that direct contact can be established within a matter of seconds with these new technologies, the impact on the customer's perceived relationship with the brand remains an issue of strategic importance that needs to be evaluated. In order to exploit the advantages of technology, a full understanding of the factors and processes involved in the customer‐brand relationship associated with use of self‐service banking channels is necessary.

Design/methodology/approach

The methodology is an empirical study using bank customers as participants, which was conducted to examine the impact of salient relationship norms on customers' perceptions of their relationship with their bank.

Findings

Based on the experiment data, the paper establishes the relevance of the concepts of communal and exchange relationship norms in the study of customer‐brand relationships in a business context.

Originality/value

The implications from the findings provide insights into the importance of relationship theory in explaining customers' perceived relationship with brands, specifically that of their bank.

Details

International Journal of Bank Marketing, vol. 26 no. 2
Type: Research Article
ISSN: 0265-2323

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