Fifth, it is fairer to managers than alternative systems when the firm is exposed to significant external uncertainties. Fourth, in real labor markets, it tends to provide a advantageous self-selection effect to filter for more confident, talented and risk-taking managers who enjoy competition. Third, for real participants, it induces sufficiently more risk-taking from managers to benefit most firms. Second, it requires much less information to implement, which is important when monitoring efforts are costly it needs only one measure – that of the relative output of the competitors – to implement. It is an attractive system on paper for many reasons (e.g., Becker and Huselid, 1992 Kale et al., 2009 Lee et al., 2008 Pissaris et al., 2010): First, it is as efficient, theoretically (e.g., in expected value terms for all participants), as a perfectly monitored piece-rate scheme. 1 It remains the standard compensation system for top management positions in Fortune 500 firms. Tournament-style compensation is popular, especially in western economies – as seen in its application to business, sports, entertainment and other activities where ‘winning is everything’ (e.g., Frank and Cook, 2013 MacDonald, 1988 Rosen, 1981). The analysis of such ‘hacking’ of compensation systems is important to do, especially for the tournament scheme. We expose the vulnerabilities of tournaments to cheating – through both unilateral and bilateral deception – and describe the related impacts and implications to affected and relevant parties. Our research question in this paper focuses on as-yet-hidden flaws in that popular compensation system specifically, we inquire as to whether tournament schemes are susceptible to fraud. One such alternative is the tournament compensation scheme, as described by Lazear and Rosen (1979), where managers compete for rank-order prizes and monitoring is minimized (i.e., only the relative outputs of the competitors are necessary to measure). For example, when worker monitoring is free, an effort input-based scheme is efficient however, outside of that often unrealistic ideal, alternative schemes may provide better results. Compensation schemes vary in form, and in associated benefits, costs and risks. The structure of that compensation determines whether managers put in the optimal level of effort and take on the proper amount of smart risks (e.g., Bloom and Michel, 2002 Hvide, 2002 Tekleab et al., 2005). Publication History: Formerly known as Cuadernos de Economía y Dirección de Empresa See more Open Access OptionĪ firm's choice of its compensation scheme is strategic because it affects performance through how well the interests of its manager-agents align with those of its owner-principals. Our main concern is that articles have strong theoretical foundations, meet the highest analytical standards, and provide new insights that contribute to the better understanding of managerial phenomena. It is therefore a multidisciplinary journal inspired by diversity and open to methodological plurality. The journal was indexed in the SCCI in 2008, and it is published in English under the new title (BRQ) since 2014.įrom its very beginnings, BRQ provides widespread coverage of high quality research in a broad range of topics such as human resource management, organization theory, strategic management, corporate governance, managerial economics, marketing, finance, accounting and operations management. Born in 1998 as Cuadernos de Economía y Dirección de la Empresa (CEDE), it soon became the leading management publication in Spanish thanks to its strong academic reputation. BRQ Business Research Quarterly is the official journal of ACEDE (Spanish Academy of Management).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |