Presented at the CCC Doctoral Conference in 2024
Extant literature shows that top executives often consider the size of their CEO’s compensation when deciding whether to leave an organization. While the size of the pay package is important, executive compensation is multifaceted, encompassing not only base salaries and bonuses but also long-term pay components with variable vesting schedules. This complexity introduces variability in both the amount and temporal dimension of CEO compensation, which raises a question: How do executives respond to the temporal dimension of their CEO’s compensation? This paper addresses this question by examining the impact of the CEO’s pay duration—the time until compensation benefits are realized—on the departure decisions of non-CEO executives. We find that longer CEO pay duration is associated with a higher rate of non-CEO executive voluntary departure, potentially because it signals a delay in promotion opportunities. To further investigate this mechanism, we show that responses to CEO pay duration vary based on factors affecting promotion expectancies. This study provides the first evidence of how the temporal dimension of CEO compensation—an often overlooked dimension of pay—affects the departure decisions of non-CEO executives. This essay is currently under review in Organization Science and has been presented at various conferences, including the Academy of Management and the Strategic Management Society annual conferences in 2023, and the CCC Doctoral Conference in 2024.
Winner for the PhD Paper Prize at the SMS Conference in 2024
While gender inequalities in compensation are well-documented across various sectors, reports vary on the extent and nature of these inequalities in CEO compensation. Potentially limiting our understanding of these inequalities is the focus on disparities in pay amounts among CEOs, which may mask inequalities in structural processes that influence pay distribution at the CEO level. This paper addresses this gap by examining potential differences between female and male CEOs in two key criteria that guide performance-pay allocation: the number of performance goals and the length of performance evaluation periods. Performance-based pay, which constitutes a significant portion of CEO compensation, relies heavily on these criteria, making their analysis crucial for understanding gender disparities at the CEO level. We explore variations in these performance evaluation criteria for CEOs. The findings reveal that female CEOs often face stricter evaluation criteria, particularly in male-dominated boards and when they have limited past managerial experience. This study contributes to the strategic management literature by providing insights into the complex structures of compensation packages and performance evaluation processes, emphasizing the need for fairer compensation systems that consider gender equity at the CEO level. We are scheduled to present this project at a number of conferences, including the Academy of Management and Strategic Management Society conferences in 2024. The paper is also sorted into the short-list for the PhD Paper Prize in the upcoming Strategic Management Society conference.
Scheduled to be presented at the SMS Conference in 2024
This paper investigates the impact of the vesting of long-term payments to the CEO on the firm’s approach to handling subsequent lawsuits. Prolonged lawsuits can lead to rising legal costs, diversion of resources from core business activities, and negative publicity that harms the company’s reputation. To avoid these long-term financial and non-financial penalties, a firm might seek an early settlement through mutual agreement with opposing parties. However, settlements can impose sizeable expenses on the firm, potentially decreasing stock value in the short term. Consequently, managers face a trade-off: they must choose between avoiding lengthy legal battles, with the associated costs, or deferring the legal process to maintain stock values in the present. Given research linking long-term payments with myopic loss aversion, we hypothesize that CEOs vested with long-term compensation shortly before their firms face a lawsuit may prioritize maintaining the value of their payments over the firm’s long-term benefit. Examining lawsuits against firms, we find a positive relationship between long-term compensation value and lawsuit duration that is more pronounced among CEOs who display a tendency to hold onto their options. In turn, lawsuit duration is negatively linked with firm performance and earnings. This study reveals a novel link between long-term CEO compensation and corporate legal strategy, shedding light on the potentially adverse effects of long-term incentives. This paper is scheduled to be presented at the upcoming Strategic Management Society annual conference.
Presented at the AOM Conference in 2022
This paper studies the effects of incentive framing on various dimensions of individual creativity, in collaboration with Cédric Gutierrez and Pier Vittorio Mannucci from Bocconi University. Specifically, we compare the effect of negatively framed performance incentives, which induce a perception of loss, with economically equivalent positively framed performance incentives, which induce a perception of gain. We focus on their impact on two crucial creative processes: convergent thinking and divergent thinking. We argue that these processes are facilitated by different mechanisms: convergent thinking is primarily affected by an individual’s focus, while divergent thinking is influenced by cognitive flexibility. To explore the effects of incentive framing on these two processes, we designed an experimental study using the Remote Associates Test (RAT) as the convergent thinking task and the Divergent Association Test (DAT) as the divergent thinking task. Our results suggest that negatively framed incentives are more effective for convergent thinking. Additionally, positive framing appears to reduce performance in divergent thinking, while negative framing yields results comparable to the baseline. We are currently expanding this research by collecting more data and delving further into the mechanisms. This study was presented at the Academy of Management conference in 2022.