nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2016‒09‒11
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Believe Me, You are (not) that Bad By Gonzalez Jimenez, Victor
  2. Deferred compensation and risk-taking incentives By Roman Inderst; Marcus Opp; Florian Hoffmann
  3. Self-Chosen Goals : Incentives and Gender Differences (revision of 2015-021) By Dalton, P.S.; Gonzalez Jimenez, V.H.; Noussair, Charles
  4. Restrictions on the Use of Effective (Incentive) Contracts in the Public Sector and Public Service By Barinova, V. A.; Eremkin, V. A.; Lanshina, T. A.; Pleskachev, Yuriy Andreevich
  5. The Introduction of Performance Management in the Federal Bodies of Executive Power: Evaluation of Results and Suggestions for Improvement By Yuzhakov, Vladimir Nikolaevich; Dobrolyubova, Elena; Klochkova, E.N.
  6. Do heavily-unionized companies compensate their CEOs less in periods of financial distress? Evidence from Canadian companies during the financial crisis. By Muhammad Umar Boodoo
  7. Can overtime premium flexibility promote employment? Firm- and worker-level evidence from a labour law reform By Pedro S. Martins

  1. By: Gonzalez Jimenez, Victor (Tilburg University, Center For Economic Research)
    Abstract: This paper studies the effect of incentive schemes incorporating status classes on workers’ performance. I focus on performance comparisons between similarly skilled workers that belong to different status classes. A theoretical framework predicts that, under certain conditions, low ability workers attain high performance when they are assigned to a high rather than a low status class, and that high ability workers achieve high performance irrespective of the received status. These predictions are tested in a laboratory setting, where subjects are randomly assigned to a high status or a low status condition and constant performance feedback is provided. The experimental data support both predictions: low ability subjects assigned to the high status condition outperform their low status counterparts by 0.53 standard deviations in a cognitively challenging task, and high ability subjects display high performance outcomes in both status classes. Moreover, I explore the subjects’ beliefs about performance as a mechanism to explain these results. I find that low ability subjects assigned to the high status exhibit performance targets that were as high as those elicited by high ability participants. This suggests that these workers used status to believe that they were good performers, and performed accordingly.
    Keywords: performance; beliefs; experiments; cognition
    JEL: D03 C91 D84 M54 Z13
    Date: 2016
  2. By: Roman Inderst (Univ. Frankfurt and Imperial College Lon); Marcus Opp (UC Berkeley, Haas School of Business); Florian Hoffmann (University of Bonn)
    Abstract: Our paper develops a simple principal-agent framework to analyze the equilibrium relationship between risk-taking and the timing of pay. In our setup, the agent's one-time action has persistent effects through affecting the arrival time distribution of a disaster event. While the principal receives informative signals about the agent's action over time, it is costly to rely on this information for incentive pay since the agent is relatively impatient. Optimal compensation contracts resolve the tension between impatience and information with at most two payout dates. Our framework lends itself to analyze recent regulatory interventions mandating minimum deferral periods and clawback provisions in the financial sector. It shows how such regulatory interference in the timing dimension causes the principal to adjust other dimensions of the compensation contract, which may then lead to higher risk-taking. Mandatory deferral requirements are more likely to be effective in reducing risk-taking when competition for agents is high.
    Date: 2016
  3. By: Dalton, P.S. (Tilburg University, Center For Economic Research); Gonzalez Jimenez, V.H. (Tilburg University, Center For Economic Research); Noussair, Charles (Tilburg University, Center For Economic Research)
    Abstract: To boost employees’ performance, firms often offer monetary bonuses when production goals are reached. However, the available evidence indicates that the particular level at which a goal is set is critical to the effectiveness of this practice. Goals must be challenging yet achievable. Computing optimal goals when employees have private information about their own abilities may be impossible for an employer. To solve this problem, we propose a compensation scheme, in which workers set their own production goals and bonuses. We provide a simple model of self-chosen goals and test its predictions in the laboratory. The model predicts that (a) the self-chosen goal contract is more cost effective than a piece rate contract for an employer interested in attaining a desired level of output, and that (b) workers set goals that they systematically outperform. Our experimental data support both predictions. We also observe sharp gender differences in the experiment. The self-chosen goal contract increases the performance of men but not of women relative to a piece rate contract. Women set lower goals, but outperform them to a greater extent than men.
    Keywords: contracts; bonus ; goal-dependant preferences; endogenous goals; productivity; gender differences
    JEL: C91 C92 J16 J24
    Date: 2016
  4. By: Barinova, V. A. (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Eremkin, V. A. (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Lanshina, T. A. (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Pleskachev, Yuriy Andreevich (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The work is aimed at theory systematization concerning the incentive contracts and performance-based pay. Based on theoretical analysis, the difference is drawn between the terms "effective contract", "incentive contracts", "effective rate of wages." The authors analyze international experience of incentive contracts’ practical implementation in different human resource management systems.
    Keywords: incentive contracts, effective contract, performance-based pay, effective rate of wages
    Date: 2016–06–09
  5. By: Yuzhakov, Vladimir Nikolaevich (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Dobrolyubova, Elena (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Klochkova, E.N. (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: As part of this work monitored the degree of implementation of instruments and control mechanisms as a result of the activities of federal executive bodies; developed proposals for improving the implementation of instruments and control mechanisms as a result of the activities of the federal bodies of executive power on the monitoring results; developed proposals to adjust the systems of performance indicators of the federal bodies of executive authority, tools and performance management mechanisms, including the correction of normative legal acts.
    Keywords: federal executive bodies, performance management
    Date: 2016–05–16
  6. By: Muhammad Umar Boodoo
    Abstract: This paper studies the strategic interaction between employee stakeholders, in particular labor unions, and top management, and evaluates the effect of the two parties’ inherent competitive rent-seeking behavior on CEO pay. Using a panel of firms listed on the S&P/TSX composite index, this paper finds that CEO compensation withstood the financial crisis despite lower and even negative corporate performance. Further, heavily-unionized companies were associated with higher CEO pay in terms of non-equity elements such as salary and pension allocations. The presence of unions had no observed effect in reducing bonuses, stock options, and restricted stock units. These findings have implications for the debate on income inequality, and the power of unions to bring about change.
    Keywords: Executive labor market; Economic inequality; Executive pay; Labor union; Great Recession; Union wage effects
    JEL: J33
    Date: 2016
  7. By: Pedro S. Martins
    Abstract: In 2012, in the midst of a recession, a labour law reform in Portugal allowed firms to reduce the overtime premium paid to their workers by 50% or more. Until then, overtime premiums were set by law at a relatively high level and could not be cut unilaterally. We analyse matched employer-employee panel data, including worker-level base and overtime hours and pay, to shed light on the effects of the resulting greater flexibility in overtime pay setting. We find that half of the firms using overtime in 2011 did reduce their overtime premiums in a manner consistent with the reform, in particular those firms making greater use of overtime and paying higher premiums. Moreover, using difference-in-differences matching and a long list of covariates, we find that those firms that cut overtime premiums exhibit significant relative increases in overtime usage, employment and sales following the reform. Overall, our results highlight the important but not exclusive role of legal restrictions behind downward nominal pay rigidity. Our findings also suggest a significant potential of overtime pay flexibility to promote employment, even during a downturn.
    Keywords: Working time, wage rigidity, employment resilience, labour reforms
    JEL: J22 J23 J38
    Date: 2016–08

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