Disentangling compensation and employment risks using the behavioral agency model

Larraza‐Kintana, Martín; Wiseman, Robert M.; Gómez‐Mejía, Luis R.; Welbourne, Theresa M.

doi:10.1002/smj.624

Cited by 187 publications

(202 citation statements)

References 81 publications

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“…The environmental performance measures we used are dependent on firms' environmental awards, publicly observed events, and commonly available information, which may be a crude way to describe firms' engagement in environmental management and only partially capture the real impacts caused by firms' environmental behaviors. Also, the environmental performance measures we used may not necessarily be the ones boards of directors would use to appraise executives' work; some boards may prefer to institute behavior-based rather than outcome-based incentive schemes to achieve optimal contracting (Capezio et al 2011;Larraza-Kintana et al 2007). Finally, due to data availability, we only focus on a narrow set of board characteristics.…”

Section: Discussionmentioning

confidence: 99%

Are Top Executives Rewarded for Environmental Performance? The Role of the Board of Directors in the Context of China

Zou

Zeng

Xie

et al. 2014

Human and Ecological Risk Assessment: An International Journal

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Based on institutional and agency theories, this study investigates whether firms use environmental performance as a criterion in incentive schemes for top executives in China, where the weakness of environmental regulations is criticized, and examines the potential moderating effects of board composition on the relationship between environmental performance and top executives' compensation. Our analysis of 687 publicly traded firms in the manufacturing industry for the period 2008-2010 finds evidence of a positive association between environmental performance and top executives' compensation. It shows that in firms with Chief Executive Officer-chairperson duality and larger boards, there is a tighter environmental performance-pay relationship, while top executives are found to be rewarded less for environmental performance in firms whose directors hold significant ownership. The presence of independent directors is not found to exert a significant influence on the environmental performance-pay relationship.

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Section: Discussionmentioning

confidence: 99%

Are Top Executives Rewarded for Environmental Performance? The Role of the Board of Directors in the Context of China

Zou

Zeng

Xie

et al. 2014

Human and Ecological Risk Assessment: An International Journal

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“…In particular, some studies have shown that CEOs benefit from an acquisition regardless of the actual performance of the acquisition (Bliss & Rosen, 2001;Harford & Li, 2007) and appear to use acquisitions to increase their compensation (Seo et al, 2014). However, acquisitions and divestitures have often been applied as measures of increased risk taking in works adopting theories such as the BTOF, PT or the BAM (e.g., Iyer & Miller, 2008;Larraza-Kintana et al, 2007;Matta & Beamish, 2008;Park, 2003). Measures are often confounded even within the same theory.…”

Section: Future Research Opportunities and Challenges Across The Theomentioning

confidence: 99%

Managerial Risk Taking

Hoskisson

Chirico

Zyung³

et al. 2016

Journal of Management

277

132

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Managerial risk taking is a critical aspect of strategic management. To improve competitive advantage and performance, managers need to take risks, often in an uncertain environment. Formal economic assumptions of risk taking suggest that if the expected values for two strategies are similar but one is a greater gamble (uncertain), managers will choose the strategy with a more certain outcome. Based on these assumptions, agency theory assumes that top managers should be compensated or monitored to achieve better outcomes. We review the theory and research on agency theory and managerial risk taking along with theories that challenge this basic assumption about risk taking: the behavioral theory of the firm, prospect theory, the behavioral agency model and the related socioemotional wealth perspective, and upper echelons theory. We contribute to the literature by reviewing and suggesting research opportunities within and across these theories to develop a comprehensive research agenda on managerial risk taking.

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“…The potential loss of compensation implies a threat to the person's basic standard of living. Furthermore, “since termination results in the complete loss of all current income and puts in serious jeopardy future income, employment risk represents the ultimate threat to an agent's wealth” (Larraza‐Kintana et al, 2007). Risk bearing makes the executive more vulnerable to the negative consequences (such as foregone pay or dismissal) of taking risks (such as pursuing supply chain integration) if the results of such choices are poor or disappointing.…”

Section: Theoretical Framework and Hypothesesmentioning

confidence: 99%

The Decision of the Supply Chain Executive to Support or Impede Supply Chain Integration: A Multidisciplinary Behavioral Agency Perspective*

2009

Self Cite

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Applying the behavioral agency model developed by Wiseman and Gomez-Mejia (1998), this article analyzes human resource factors that induce supply chain executives (SCEs) to make decisions that foster or hinder supply chain integration. We examine two internal sources (compensation and employment risk) and one external source (environmental volatility) of risk bearing that can make SCEs more reluctant to make the decision to promote supply chain integration. We argue and empirically confirm the notion that an employment and compensation system that increases SCE risk bearing reduces the SCE's willingness to make risky decisions and thus discourages supply chain integration. We also reveal that this negative relationship becomes stronger under conditions of high environmental volatility. In addressing the "so what?" question, we found empirical support for the hypothesis that supply chain integration positively influences operational performance. Even though this decision has a positive value for the firm, we showed that SCEs discourage supply chain integration when they face higher risk bearing. Hypotheses are tested using a combination of primary survey data and archival measures in a sample of 133 Spanish firms.

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Disentangling compensation and employment risks using the behavioral agency model

Cited by 187 publications

References 81 publications

Are Top Executives Rewarded for Environmental Performance? The Role of the Board of Directors in the Context of China

Are Top Executives Rewarded for Environmental Performance? The Role of the Board of Directors in the Context of China

Managerial Risk Taking

The Decision of the Supply Chain Executive to Support or Impede Supply Chain Integration: A Multidisciplinary Behavioral Agency Perspective*

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