HIRING FROM HIGH‐RISK POPULATIONS: LESSONS FROM THE U.S. MILITARY

In this study, we evaluate the performance of waivered recruits in the U.S. military. Unlike the private sector, the military has formal standards for identifying ideal recruits and uses a formal screening process to determine those within risky populations who are most likely to succeed. (Recruits who make it through the screening process are issued a waiver.) The military's establishment of waiver categories and its tracking of waiver status provide us with a case study for determining whether such risk‐identification strategies work. Using FY99–FY08 service‐level waiver and personnel data, we evaluate whether the military recruiting strategy has been successful and whether firms should consider adopting similar screening mechanisms. We estimate the effect of waiver status on attrition and promotion, our primary performance indicators, after controlling for other quality indicators. We find that waivered recruits, on the whole, are not particularly poor performers, although their inherent riskiness does vary by service and by waiver type. (JEL J45, M51, J23)     

Portion Distortion: A Study of College Students

This study compared designated serving size to actual consumption (portion size). Forty‐two college students estimated portion size and serving size of cereal, candy, and punch. Most (81%) refer to package labels, and over a third of women identified serving size as “of major interest.” Only one‐third accurately estimated the serving size of cereal within 10% of the correct amount. The stated serving size of cereal and punch was less than half of the portion size. Increasing serving sizes to more closely correspond to portion sizes would benefit consumers by providing information more likely to represent the nutritional quantities commonly consumed.     

THE ROLE OF CRIMINAL SANCTIONS IN ANTITRUST ENFORCEMENT

Recently enacted sentencing guidelines were designed to reduce disparity and to increase the average sanction for white-collar offenders. Whether these outcomes will be achieved, however, depends on how closely judges adhere to the new guidelines. We cannot yet determine how the guidelines will be implemented but can learn much about judicial behavior by studying past sentencing practice.
This paper examines sentences imposed on criminal antitrust offenders from 1955 to 1980. Judges are appointed for life and ostensibly are "independent" of the political process. The data suggest, however, that judges do not operate in apolitical vacuum. When Congress increased the status of antitrust violations from misdemeanor to felony in 1974, judges responded by doling out higher penalties–even for offenders not subject to new higher statutory maximums. In addition, the paper shows that Republican judges tend to impose harsher antitrust penalties than do Democratic judges, and that sentencing behavior apparently is influenced by a judge's prospect of promotion to a higher court position. These findings have important policy implications both for the judicial selection process and for ensuring that the judicial branch follows congressional wishes.     

Executive Compensation Tied to ESG Performance: International Evidence

Using a wide sample of international publicly traded firms, this paper studies the rapidly increasing practice of incorporating Environmental, Social, and Governance (ESG) metrics in executive compensation contracts. Our evidence suggests that this compensation practice varies at the country, industry, and firm levels in ways that are consistent with efficient incentive contracting. We also observe that reliance on ESG metrics in executive compensation arrangements is associated with engagement, voting, and trading by institutional investors, which suggests that firms could be adopting this practice to align their management's objectives with the preferences of certain shareholder groups. Finally, we find that the adoption of ESG Pay is accompanied by improvements in key ESG outcomes, but not by improvements in financial performance.