Aligning managed care contracts, compensation plans, and incentive models

Today's pure production-based compensation and incentive models are lagging behind new, third-party, "value based" payment models, such as shared savings, bundled payments, and pay for performance. Financial executives are struggling with the emerging disconnects between new, external payment models and traditional methods providers use to distribute funds internally. To begin to align internal payment models with emerging third-party payment models, providers should inventory the misaligned incentives within their own organizations, engage their physicians and payers in a dialogue on what needs to be paid and how, and learn from past mistakes. No perfect payment distribution model exists. Rather, providers should choose a best-fit model based on their market position, culture, and readiness for change. Ultimately, finance executives should take the lead in aligning their organization's internal and external payment models.     

Competition,cooperation, and corporate culture

Cooperation between workers can be of substantial value to a firm, yet its level often varies substantially between firms. We show that these differences can unfold in a competitive labor market if workers have heterogeneous social preferences and preferences are private information. In our model, workers differ in their willingness to cooperate voluntarily. We show that there always exists a separating equilibrium in which workers self‐select into firms that differ in their monetary incentives as well as their level of worker cooperation. Our model highlights the role of sorting and worker heterogeneity in the emergence of heterogeneous corporate cultures. It also provides a new explanation for the coexistence of nonprofit and for‐profit firms.

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Implementing a strategic approach to employee wellness--globally and locally

Today's multinational companies understand the need for a healthier workforce. Whether in developed markets such as the United States and the United Kingdom, or in emerging economies such as China and India, health trends pointing to a rising incidence of chronic disease and lifestyle-related health issues are requiring a strategic response from employers. A study MetLife undertook in coordination with the Sloan Center on Aging & Work at Boston College involved a detailed examination at four large multinational companies to understand how health trends vary by country and the specific programs the organizations implemented to support a healthier workforce. This article highlights some of the bestpractices the study found for an integrated health and wellness program.     

The industrial brand personality scale: Building strong business-to-business brands

To remain distinct and build strong business relationships in a competitive business-to-business (B2B) environment, an increasing number of industrial marketers attempt to exploit the potential of branding. However, brand management in the industrial sector is still at its starting point. For this reason, the authors introduce the concept of brand personality to industrial markets. Based on a series of qualitative and quantitative studies, the authors develop and validate an Industrial Brand Personality Scale. Furthermore, they examine whether brand personality perception differences exist among different types of industrial transactions and among different members in the buying center. The analysis yields a framework for theoretical discussion and provides B2B managers with a tool to build strong B2B brands in an increasingly competitive industrial market.     

Ownership Unbundling in Electricity Distribution: Empirical Evidence from New Zealand

New Zealand is the only country to date to have implemented forced ownership unbundling of electricity distribution from the rest of the electricity supply industry (in 1998). This paper examines the impact of this policy on electricity prices, quality of service and costs. We find that ownership unbundling did not achieve its objectives of facilitating greater competition in the electricity supply industry but that it did lead to lower costs and higher quality of service. We suggest that this experience indicates the potential benefits of ownership unbundling in Europe but also the danger of unintended consequences.     

Too Good to be True: Board Structural Independence as a Moderator of CEO Pay‐for‐Firm‐Performance

Whether voluntary or mandatory in nature, most recent corporate governance codes of best practice assume that board structural independence, and the application by boards of outcome‐based incentive plans, are important boundary conditions for the enforcement of Chief Executive Officer (CEO) pay‐for‐firm‐performance; that is, for optimal contracting between owners and executive agents. We test this logic on a large Australian sample using a system Generalized Method of Moments (GMM) approach to dynamic panel data estimation. We find that Australian boards exhibiting best practice structural arrangements – those chaired by non‐executives and dominated by non‐executive directors at the full board and compensation committee levels – are no more adept at enforcing CEO pay‐for‐firm‐performance than are executive‐dominated boards. These findings suggest that policy makers' faith in incentive plans and the moderating influence of structural independence per se may be misplaced. Our findings also hold significant implications for corporate governance theory. Specifically, the findings lend further support to a contingency‐based understanding of board composition, reward choice and monitoring; an approach integrating the insights afforded by behavioural approaches to Agency Theory and by social‐cognitive and institutional understandings of director outlook, decision‐making and behaviour.     

Behavioural Orientations of Non‐Profit Boards as a Factor in Entrepreneurial Performance: Does Governance Matter?

Relatively little is understood about factors triggering entrepreneurial behaviour within organizations not driven by profit motives. Governance plays an important role in non‐profits, particularly boards of directors. Integrating resource‐based theory and entrepreneurial orientation research, we examine the influence of non‐profit boards as strategic resources shaping the organization's entrepreneurial orientation and performance. In particular, we focus on the non‐profit board's underlying behavioural orientations, or the extent to which the board is strategic, activist, conservative, and cohesive. Findings from a cross‐sectional survey on arts and culture organizations demonstrate that three of these behavioural orientations impact levels of entrepreneurship occurring within non‐profits. Higher levels of entrepreneurship affect social performance, but not financial performance.     

How accurate are government forecasts of economic fundamentals? The case of Taiwan

A government’s ability to forecast key economic fundamentals accurately can affect business confidence, consumer sentiment, and foreign direct investment, among others. A government forecast based on an econometric model is replicable, whereas one that is not fully based on an econometric model is non-replicable. Governments typically provide non-replicable forecasts (or expert forecasts) of economic fundamentals, such as the inflation rate and real GDP growth rate.In this paper, we develop a methodology for evaluating non-replicable forecasts. We argue that in order to do so, one needs to retrieve from the non-replicable forecast its replicable component, and that it is the difference in accuracy between these two that matters. An empirical example to forecast economic fundamentals for Taiwan shows the relevance of the proposed methodological approach. Our main finding is that the undocumented knowledge of the Taiwanese government reduces forecast errors substantially.     

Particle filters for continuous likelihood evaluation and maximisation

In this paper, a method is introduced for approximating the likelihood for the unknown parameters of a state space model. The approximation converges to the true likelihood as the simulation size goes to infinity. In addition, the approximating likelihood is continuous as a function of the unknown parameters under rather general conditions. The approach advocated is fast and robust, and it avoids many of the pitfalls associated with current techniques based upon importance sampling. We assess the performance of the method by considering a linear state space model, comparing the results with the Kalman filter, which delivers the true likelihood. We also apply the method to a non-Gaussian state space model, the stochastic volatility model, finding that the approach is efficient and effective. Applications to continuous time finance models and latent panel data models are considered. Two different multivariate approaches are proposed. The neoclassical growth model is considered as an application.