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Compensation and BenefitsRemove Compensation and Benefits →

New research on compensation and benefits from Harvard Business School faculty on issues including the efficacy of incentive plans, employee stock ownership plans, and executive compensation.
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Short-Termism, Shareholder Payouts, and Investment in the EU

by Jesse M. Fried and Charles C.Y. Wang

Shareholder-driven “short-termism,” as evidenced by increasing payouts to shareholders, is said to impede long-term investment in EU public firms. But a deep dive into the data reveals a different story.

Consumers Punish Firms that Cut Employee Pay in Response to COVID-19

by Bhavya Mohan, Serena Hagerty, and Michael Norton

In the wake of COVID-19, firms announced both employee furloughs and (typically small) CEO wage cuts. This research shows that firms’ treatment of employees matters far more to consumers than executive pay cuts.

The Evolution of CEO Compensation in Venture Capital-Backed Startups

by Michael Ewens, Ramana Nanda, and Christopher Stanton

Resolving uncertainty related to market demand—so called “product-market” fit—marks a key inflection point in the compensation contract for CEOs of venture-capital backed firms.

It's Time for a Bipartisan Health Plan for Employers and Employees

by Regina E. Herzlinger and Richard J. Boxer

Regina E. Herzlinger and Richard J. Boxer prescribe a seemingly impossible cure for battling health care options: a plan that embraces both Republican and Democratic ideas. Open for comment; Comment(s) posted.

Nominal and Opportunity Effects of Managerial Discretion

by Wei Cai, Susanna Gallani, and Jee Eun Shin

This study of field data from a Chinese manufacturing company explores the consequences of subjective performance evaluations leading to bonuses and penalties. Results may help practitioners improve the effectiveness of incentive systems.

Corporate Purpose and Firm Ownership

by Claudine Gartenberg and George Serafeim

This study shows that corporate purpose varies greatly according to the nature of firm ownership, and these differences can be least partly explained by the choices and compensation of the CEOs. The greater the pay gap between CEOs and employees, the lower the sense of corporate purpose within the organization.

The Comprehensive Effects of Sales Force Management: A Dynamic Structural Analysis of Selection, Compensation, and Training

by Doug J. Chung, Byungyeon Kim, and Byoung G. Park

When sales forces are well managed, firms can induce greater performance from them. For this study, the authors collaborated with a major multinational firm to develop and estimate a dynamic structural model of sales employee responses to various management instruments like compensation, training, and recruiting/termination policies.

rTSR: When Do Relative Performance Metrics Capture Relative Performance?

by Paul Ma, Jee-Eun Shin, and Charles C. Y. Wang

Managers are increasingly evaluated based on relative performance metrics, particularly relative total shareholder returns (rTSR). This paper finds that the majority of firms that tie CEO performance-based contracts to rTSR do a remarkable job of filtering out the systematic risk in TSR. However, a significant portion of firms make relatively poor choices in the design and selection of rTSR, a result of weak governance and an overreliance on compensation consultants.

Forget Cash. Here Are Better Ways to Motivate Employees

by Dina Gerdeman

In today's tight job market, employers must focus on how to attract and keep top talent. Giving away stacks of money may not always be the best incentive, warns Ashley Whillans. Open for comment; Comment(s) posted.

Why Business Should Support Employees Who Are Caregivers

by Danielle Kost

Shifting demographics are causing an increasing number of people to act as caregivers for family and friends—but employers seem hardly to notice the trend. Joseph Fuller discusses why companies should support them. Open for comment; Comment(s) posted.

The Salary Taboo: Privacy Norms and the Diffusion of Information

by Zoë B. Cullen and Ricardo Perez-Truglia

Barriers to the diffusion of salary information have implications for a wide range of labor market phenomena. This study of employees of a real organization shows that individuals significantly misinterpret their peers’ salaries, partly due to pervasive preferences for concealing own salary, and a potentially strategic decision of high earners to withhold their personal information.

Knowing What Your Boss Earns Can Make You Work Harder

by Rachel Layne

Learning what your co-worker earns can make you less productive, but knowing your manager's paycheck can motivate you to work harder. Research by Zoë Cullen. Open for comment; Comment(s) posted.

How Much Does Your Boss Make? The Effects of Salary Comparisons

by Zoë B. Cullen and Ricardo Perez-Truglia

This study of more than 2,000 employees at a multibillion dollar firm explores how perceptions about peers’ and managers’ salaries affect employee behaviors and preferences for equity. Employees exhibit a high tolerance for inequality when job titles differ, which may explain why incentives are granted through promotions, and gender pay differences are most pronounced across positions.

Kids of Working Moms Grow into Happy Adults

by Dina Gerdeman

In earlier research, Kathleen McGinn and colleagues discovered that adult kids of working moms are high achievers at work. Now it turns out they are happy, too. Open for comment; Comment(s) posted.

Analyzing the Aftermath of a Compensation Reduction

by Jason Sandvik, Richard Saouma, Nathan Seegert, and Christopher Stanton

This study of the effects of compensation cuts in a large sales organization provides a unique lens for analyzing the link between compensation schemes, worker performance, and turnover.

Should Companies Disclose Employee Compensation?

by James Heskett

SUMMING UP Do you want your salary broadcast on the company website? James Heskett's readers debate the value of corporate transparency on compensation. Open for comment; Comment(s) posted.

If the CEO’s High Salary Isn't Justified to Employees, Firm Performance May Suffer

by Dina Gerdeman

Researcher Ethan Rouen discovers that rank-and-file employees understand the boss deserves a big salary, but only when the number is fully explained. Open for comment; Comment(s) posted.

Does Financial Misconduct Affect the Future Compensation of Alumni Managers?

by Boris Groysberg, Eric Lin, and George Serafeim

Analyzing data from an executive search firm, this paper explains how former employees who are free from wrongdoing still pay a price in stigma after incidents of corporate financial misconduct. The finding is potentially disquieting for all managers, because it suggests that one’s human capital can be impaired even long after one moves on and suggests the need for developing a human capital strategy for reacting to misconduct of past employers.

Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance

by Ethan Rouen

Among this paper’s contributions is evidence that different types of pay disparity matter in different ways to firm employees, and that disparity created by pay that is unrelated to the economics of the firm negatively impacts employee satisfaction, with consequences for firm performance. The paper also gives investors and proxy advisors a roadmap to interpret pay ratios and pay disparity. This roadmap may help regulators and firms to, respectively, mandate and prepare more informative disclosures.

Equality and Equity in Compensation

by Jiayi Bao and Andy Wu

Why do some firms such as technology startups offer the same equity compensation packages to all new employees despite very different cash salaries? This paper presents evidence that workers dislike inequality in equity compensation more than salary compensation because of the perceived scarcity of equity.