Court Intervention as a Governance Mechanism over CEO Pay: Evidence from the Citigroup Derivative Lawsuit

Abstract

We use an unanticipated court ruling in a lawsuit against Citigroup claiming corporate waste related to CEO pay to analyse court intervention as an alternative governance mechanism in cases of excess pay. We find a negative relation between announcement returns and excess pay, consistent with shareholders of these firms perceiving court intervention as net costly. However, we find a positive relation between announcement returns and excess pay accompanied by poor performance, suggesting that intervention is welcome when pay is more egregious. Finally, we find that firms with excess pay and whose shareholders welcome intervention reduce future pay relative to other firms, suggesting that the threat of court intervention is a potential mechanism to control excess pay.     

Money and rank in the labor market

We analyze the gains/losses in wage and in rank position for workers switching firm. Voluntary movers enjoy a wage premium relative to stayers, but that premium declines with rank inside the new firm, indicating that movers are trading-off money and rank.     

Networks of knowledge among unionized firms

Abstract.  We develop a model of strategic networks in order to analyze how trade unions will affect the stability of R&D networks through which knowledge is transmitted in an oligopolistic industry. Whenever firms settle wages, the partially connected network is likely to emerge in the long run if and only if knowledge spillovers are large enough. However, when unions settle wages, the complete network is the unique stable network. In other words, the stronger the union bargaining power is, the more symmetric stable R&D networks will be. In terms of network efficiency, the partially connected network (when firms settle wages) does not Pareto dominate the complete network (when unions settle wages) and vice versa.     

Territorial systems and relocation: Insights from eight cases in Japan

This paper investigates the evolution patterns of eight territorial systems in Japan during the period of industry relocation. Multiple case study methodology was applied. Data were collected through interviews with entrepreneurs and local government officials. Based on the findings that reveal adaptation processes in which manufacturing firms are involved, we propose a three-stage evolutionary model to conceptualize the changes that are taking place in Japan's territorial systems. We argue that the transactional relationships are evolving towards more socialized relationships and that these relationships are evolving towards more formalized, knowledge-based innovation networks.     

Strategic flexibility as a moderator of the relationship between commitment to employees and performance in service firms

This paper examines the fit between organizational commitment to employees (OCE) and strategic flexibility. The complementariness between these two factors originates from the fact that the effect of OCE on a firm's performance depends on the type of strategic flexibility. We argue that the greater the degree of strategic flexibility, the greater the positive effect of OCE on organizational performance. Using data from a random sample of 230 service firms, the empirical results partially support this hypothesis.     

PRIVATIZATION IN CHINA: TECHNOLOGY AND GENDER IN THE MANUFACTURING SECTOR

This paper examines the impact of privatization on gender discrimination in China across firms with different technology intensities. Using a comprehensive firm‐level survey, the paper identifies gender wage‐productivity differentials by directly estimating the relative productivity levels of workers from the production function of firms. The panel structure of the survey is taken advantage of by following firms that were fully state‐owned in the initial year, and distinguishing them from firms that were later privatized. The main results show that privatization was associated with an increase in relative productivity of female workers in high technology industries, and a reduction in relative productivity of female workers in low technology industries. Time varying coefficient results suggest that the improvements in gender outcomes in high technology industries may not be maintained in the long run as the relative wage and productivity ratios tend to deteriorate, potentially due to low supply of highly educated female workers. At the same time, outcomes in privatized low technology industries increase over time, lowering the wage and productivity gaps between male and female workers. (JEL J16, J31, P20)     

Earnings distribution of Cuban immigrants in the USA: evidence from quantile regression with sample selection

This article analyses the conditional earnings distribution for Cuban immigrants in the USA considering Buchinsky sample selection in a quantile regression model. The test proposed by Huber and Melly to test the independence between error terms and regressors (conditional on the selection probability) is also considered. This is the first attempt in the migration literature to use quantile regression with sample selection. The data used come from the US American Community Survey. The results show that the hypothesis of conditional independence is not rejected, and increments in earnings associated with the usual socioeconomic characteristics in labour studies vary between the cohorts considered. The main conclusions are that a decline in returns from education may be a sign that a high level of education no longer provides a competitive advantage and that being a black person is associated with substantially lower earnings regardless of the individuals’ position in the earnings distribution. This may explain why, historically, comparatively fewer black Cubans have made the decision to emigrate to the USA because of a lack of economic incentives.     

Economic and conservation implications of a variable effort penalty system in effort-controlled fisheries

Bycatch of threatened, endangered or protected species by commercial fishers is a universal problem. Technical solutions are often applied that may impose inefficiencies across the fleet, even in periods or areas when the risk of bycatch is low. These may include gear specifically designed to avoid the bycatch which may also reduce the targeted catch, or designation of marine protected areas that exclude fishing from whole areas. In this article, we examine the effectiveness of a variable penalty system that can provide incentives for fishers to redirect their effort away from problem areas. The system is examined using a case study of fishery, which is currently subjected to gear and closure controls to limit bycatch of turtles and seabirds. An alternative incentive-based management policy using a series of differential hook penalties has been proposed as a flexible tool to discourage vessels operating in certain areas. The effects of various hook penalties and closures in key areas on fishing effort in those areas and elsewhere as well as vessel economic performance are assessed using a location choice model. The results suggest that incentive-based approaches may result in lower costs to industry than closures provided some level of residual bycatch is acceptable.     

Determinants of the acquisition of listed versus unlisted firms in different legal and institutional environments

The aim of this article is to analyse the determinants of the decision to acquire unlisted rather than listed firms in different legal and institutional environments. We estimate a probit model considering the mergers and acquisitions (M&As) announced by European listed firms (19 countries) that acquires worldwide listed or unlisted firms (36 countries) in the period 2002–2007. Our results show that managerial opportunism is a determinant in the acquisition of listed firms, occurring with greater probability in acquiring countries with low shareholder and minority shareholder protection. Information asymmetry is another relevant determinant that promotes the acquisitions of unlisted firms. Furthermore, the less developed the capital market in the country of the acquired firm, the greater the probability of acquisitions of unlisted firms. This article contributes to the M&A literature by showing that in addition to managerial opportunism and information asymmetry, the legal and institutional environments in both the acquiring and the target countries are also relevant aspects explaining the decision of whether to acquire listed or unlisted firms.     

Neoliberalism in the Laboratory? Experimental Economics on Markets and their Limits

Experimental economics is now part of mainstream economics and is fast becoming one of its most influential methods. Drawing on the distinction between market and behavioural experimentation, this article assesses the compatibility of the most influential experimental research with the neoliberal understanding of the political and moral preconditions for markets to develop. A politically relevant asymmetry at the core of this research programme will be signalled: while issues of political economy are eschewed by market experimenters (for example, whose interests are favoured and whose groups have power in economic processes), topics of moral economy are recognised and dealt with by behavioural experimenters (for example, the interactions between economic institutions and individuals' motivations and moral make-up). It is argued that experimental research has thereby contributed to a depoliticised and moralised view of markets, one that tends to present markets as a civilising institution once their technical and moral failures are recognised and adequately dealt with.