Directors'' remuneration in the theory of the firm: Specification and testing of the null hypothesis

One basis for the managerial theories has been the strong correlation between firm size and executive remuneration. This may, however, simply reflect variations in managerial quality across firms. We also show that the absence of a correlation between profitability and remuneration is not evidence in favour of the managerial theories. In this paper we follow the rewards to individual U.K. managers over time, thereby controlling for quality variation. We conclude that growth is highly rewarded and involvement in mergers and takeovers attracts an extra premium. This may explain the continued popularity of mergers despite knowledge of their general unprofitability.     

How Useful Is the Genuine Savings Rate as a Sustainability Indicator for Regions within Countries? Australia and Queensland Compared

This article shows how macroeconomic indicators of sustainable development can be applied to the Queensland economy. While recognising the complex and contentious theoretical and practical issues in deriving the Genuine Savings Rate (GSR) to serve as such an indicator, we use the World Bank's methodology, which includes only mineral depletion, deforestation and carbon dioxide emissions as environmental terms, to estimate GSRs for Queensland for the period 1989 to 1999, and compare these to World Bank estimates of Australia's GSR for the same period. We find that Queensland has a higher rate of natural resource depletion and a lower GSR than the whole of Australia. We also examine how well the World Bank GSR performs as a ‘headline’ measure of overall sustainability, review criticisms of the GSR, and compare its implicit policy implications with those of net state savings, and of the GSR plus a suite of other indicators.     

Determinacy with nominal assets and outside money

Summary. We build a finite horizon model with inside and outside money, in which interest rates, price levels and commodity allocations are determinate, even though asset markets are incomplete and asset deliveries are purely nominal.Received: 2 July 2003, Revised: 1 December 2004 JEL Classification Numbers: D50, E40, E50, E58.Correspondence to: J. Geanakoplos     

Industrial cogeneration and regulatory policy

The 1978 Public Utility Regulatory Policy Act (PURPA) fostered decentralized generation of electricity, particularly in the form of cogeneration. A model of a firms' decision to cogenerate is developed that illustrates both the interface between the firm and an electric utility, and the firm's internal interface between its primary product and cogeneration technologies. The model is used to show that the firm may operate inefficiently in both the short run and long run owing to the fixed-proportions technology of cogeneration and PURPA mandated operating procedures, respectively. Cogenerating firms that dump heat into the atmosphere may signal inefficient behavior; therefore, monitoring heat dumping may be important in measuring the success of cogeneration.     

The Timing of Purchases and Aggregate Fluctuations

We study the cyclical effects of the timing of durable goods purchases in a general equilibrium model in which both durable and non-durable goods are consumed and the durable good is lumpy. At the microeconomic level, the timing of durable goods purchases supplies some insulation for non-durable consumption over the cycle. At the macroeconomic level, the timing decisions tend to amplify and propagate wealth and income shocks. Our model also allows for endogenous price determination. When the price of the durable changes due to inflexibility of workers between sectors, the effect of adverse shocks is even stronger and longer.     

Credible assignments in coordination games

This paper uses the experimental method to examine an arbiter's ability to determine the outcome of two-person coordination games. All of the arbiter's assignments in the experiments were strict equilibrium points, but some assignments violated payoff-dominance or symmetry. An assignment that corresponds to the game's outcome is a credible assignment. The experiments test the hypothesis that an assignment to a strict equilibrium is a credible assignment. Our subjects did not find the individual rationality and mutual consistency of an equilibrium assignment to be sufficient reason for implementing the assignment when doing so conflicts with payoff-dominance or symmetry.     

Income Redistribution with Well-Informed Local Governments

This paper examines the problem of redistributing incomeacross jurisdictions and to mobile workers within jurisdictionswhen local governments have better information than the centralgovernment about local production conditions. Under the centralgovernments optimal policy, the subsidies or taxes that localgovernments provide to mobile workers normally depend on whetherthese governments are net recipients or net donors of interjurisdictionalincome transfers. Moreover, the public-input decisions of somelocal governments are distorted. The analysis demonstrates thatit may not be desirable to harmonize social policies across jurisdictions,even when the beneficiaries are quite mobile.     

Business Ethics in Australia and New Zealand

The scandals of the 1980s, extending into the 1990s, came as a profound shock to Australians and New Zealanders. Both countries have prided themselves – somewhat smugly and naively – on being open, fair and honest societies. So it was very disillusioning to see both corruption and gross dereliction of duty exposed in virtually every sphere of public life. Perhaps the most positive outcome, however, amidst an almost daily diet of amazing revelations, has been the ability of the system – and especially the judiciary and the media – to expose and deal with corruption even at the highest level.Following an extensive survey and literature review, it is clear that there is now widespread awareness of the need for reform in many areas of public administration, corporate governance and professional behaviour. However, a continuing cause for concern is the lack of leadership in identifying and addressing complex ethical dilemmas, particularly in the areas of conflict of interest and disclosure.Feedback from professional bodies, industry associations and university business schools indicates slow but uneven progress in ethics education. While several ethic centres and prominent individual ethicists have introduced innovative programs and given ethical issues greater prominence in the media, narrow vocationalism still takes precedence over personal values in the business and management curriculum.