Attention to Fairness versus Profits: The Determinants of Satisficing Pricing

We investigate determinants of the competitive behaviour of satisficing, non‐profit‐maximizing pricing. Taking a behavioural approach, we argue that pricing decisions are motivated by fairness objectives as well as the desire to achieve economic objectives. We draw from the attention‐based view to build our theoretical model explaining the contextual conditions that are most likely to be associated with attention to fairness relative to attention to achieving maximum profits when setting prices. Our hypothesized predictors of satisficing pricing decisions encompass the institutional context in which the firm is embedded, the exchange context with customers and suppliers, and the context internal to the firm. Hypotheses are tested with survey data of over 3000 firms from 15 countries. We find that the decision to set prices at a satisficing level is remarkably common, and its prevalence is associated with contextual factors that are consistent with greater attention to fairness concerns.     

TRANSFERABLE STOCK OPTIONS (TSOS) AND THE COMING REVOLUTION IN EQUITY-BASED PAY

The dominant form of equity pay in the U.S. will change dramatically when accounting rules are changed (most likely in 2005) to require companies to charge the cost of their stock option plans on their income statements. Many companies are already switching from stock options to other forms of equity pay, especially restricted stock. The most notable switcher was Microsoft, the world's largest user of stock option pay. In July 2003, partnering with J.P. Morgan, Microsoft created a onetime transferable stock option (TSO) program that allowed holders of underwater Microsoft options to sell their options to J.P. Morgan in return for restricted shares.
But the most important consequence of this transaction may not be a widespread shift by corporate America to restricted shares, but rather the creation of a more costeffective kind of stock option. By clearing the potentially messy hurdles involving taxes, accounting, SEC rules, and "transaction mechanics," Microsoft has opened the door for TSOs to be considered as an ongoing equitypay instrument, perhaps replacing standard stock options (which are not transferable). TSOs share the key advantages of restricted stock in terms of providing robust retention and ownership incentives and higher valuecost efficiency, while maintaining the key "leverage" advantage of options. In so doing, they create significant upside (and downside) while largely avoiding the "pay for pulse" problem of restricted stock. They also introduce the discipline of competitive pricing by third-party bidders. The bid prices of investment banks create nearly all of the information required for accurate estimates of option cost, which should foster greater board accountability and improved corporate governance.     

Getting comfortable with the numbers: Auditing and the micro-production of macro-order

Field observations of two audit engagements are used to interpret auditing as a ritual which transforms the financial statements of corporate management from an inherently untrustworthy state into a form that the auditors and the public can be comfortable with. The analysis draws on Collins' theory of interaction ritual chains (American Journal of Sociology, 1981, pp. 984–1014) to create an interpretative theory of auditing which offers insights into both the micro-level interactions within the audit team and the macro-level role of auditing in the economic order.     

Visitor management in the public planning policy context: A case study of Cambridge

Visitor management plans are increasingly seen by local authorities as an essential contribution they can make towards sustainable tourism. However, tourism is subject to many external influences and is only part of the system of activities and land uses at the destination. Successful visitor management must, therefore, be broadly based and rooted in a wide range of policies. The objectives for sustainable tourism in Cambridge are supported by policies at the European, national, regional, county and local level covering tourism, recreation, transport, the environment, land use and economic development. This results in an integrated policy framework that ensures consistency, encourages cooperation and long‐term planning, makes the best use of resources, opens up additional sources of finance and provides a firm justification for refusing undesirable development. Achieving integration requires the visitor management plan to be seen neither as an end nor as a beginning, but as part of a process. In Cambridge this has involved a commitment to monitoring and reviewing strategies and to ensuring a policy input on tourism issues at all levels of decision making. Appropriate ad hoc bodies have been set up. Visitor management cannot succeed in isolation: other policies must be made to work for it, not frustrate action.     

Surviving leisure time racism: the burden of racial harassment on Britain's black footballers

This paper explores the burden of racial harassment and abuse on Britain's black footballers and places this in the context of leisure time racism. It is based on research carried out between 1989 and 1994. It is suggested that the source of such racism has been a neglected issue and only gained significant recognition in 1993 when the Commission for Racial Equality launched its Let's Kick Racism Out of Football campaign. It is argued that the racial abuse and chanting aimed at black footballers are examples of racial harassment. The research gathered evidence from two locations - Leeds and Newcastle - to assess the extent to which players were being disproportionately affected by this harassment and introduces the concept of 'burden of abuse'. Some historical background is provided and football stadia are considered as key symbolic leisure sites where a basic white working class racism has found expression. The growth of black footballers since the 1970s is considered, as well as the way such players have survived the racial harassment, some of whom were interviewed as part of the research exercise.     

Rationalising the future? Foresight in science and technology policy co-ordination

Commentators from diverse fields and backgrounds have argued the present innovation environment is one constituted by unprecedented levels of uncertainty. National Foresight programmes recently have emerged as a means of co-ordinating science and technology policies and responding to a condition of uncertainty and change. Perhaps the most systematic Foresight programme is that of the United Kingdom. This article discusses the response the UK Foresight programme offers to the present and future innovation environments. In doing so, it is argued we should examine how the ‘need' for the programme is constructed and how that need is defined and shaped in relation to past UK science and technology policies. It is suggested that Foresight presents an ambivalent response to many of the concerns it proposes to address.     

Valuing Fixed-Income Options and Mortgage-Backed Securities with Alternative Term Structure Models

To value mortgage-backed securities and options on fixed-income securities, it is necessary to make assumptions regarding the term structure of interest rates. We assume that the multi-factor fixed parameter term structure model accurately represents the actual term structure of interest rates, and that the values of mortgage-backed securities and discount bond options derived from such a term structure model are correct. Differences in the prices of interest rate derivative securities based on single-factor term structure models are therefore due to pricing bias resulting from the term structure model. The price biases that result from the use of single-factor models are compared and attributed to differences in the underlying models and implications for the selection of alternative term structure models are considered.     

Management succession and financial performance of family controlled firms

This paper examines the immediate and long-term impacts on financial performance of 124 management successions within Canadian family controlled firms. When family successors are appointed, stock prices decline by 3.20% during the 3-day (−1 to +1) event window, whereas there is no significant decrease when either non-family insiders or outsiders are appointed. However, a cross-sectional analysis indicates that the negative stock market reaction to family successors is related to their relatively young age which may reflect a lack of management experience rather than their family connection per se. Investors are uncertain about the “management quality” of family successors who have less established reputations than more seasoned non-family insiders and outsiders. Non-family member appointments tend to follow periods of poor operating performance implying that there might be more scope for improvement when a non-family successor is appointed. Unlike the US sample in McConaughy et al. [McConaughy, D.L., Walker, M.C., Henderson, G.V., Mishra, C.S., 1998. Founding family controlled firms: efficiency and value, Review of Financial Economics 7, 1–19.], which indicates that the median percentage of votes held by controlling families is less than 15%, the Canadian sample indicates a more concentrated ownership with the median percentage of family controlled votes exceeding 51%. Of the firms in our sample, 62% use dual class capitalization to maintain control within the family.     

THE DESIGN OF MULTI-YEAR STOCK OPTION PLANS

Despite the explosion in the corporate use of stock options, the incentives created by stock options are not well understood by either the boards who grant them or the executives who are meant to be motivated by them. A major source of confusion stems from the corporate practice of using multi-year stock option plans. Such multi-year grants create subtle, potentially important links between current performance and future grants that can significantly dilute incentives for better performance.
For example, so-called fixed value plans provide very weak, even perverse, incentives ex ante since the value of future option grants is completely insulated from current performance. Under such plans, an executive's reward for superior performance is to receive fewer options, and to receive more options for substandard performance. In contrast, the fixed number plan creates an intrinsic link between changes in this year's stock price and changes in the value of future option grants.
The author also reports the findings of new empirical research that shows that stock option plans, taken as a whole, have a pay-to-performance correlation that is eight times stronger than that of salary and bonus. But, consistent with the analysis above, fixed value option plans have pay-to-performance that is only six times that of salary and bonus, as compared to ten times for fixed number plans.     

Obstacles to Developing Indigenous Small and Medium Enterprises: An Empirical Assessment

The article reports the results of field surveys conducted inSri Lanka's leather industry and Tanzania's furniture industry.It outlines an approach to learning how small and medium enterprises(SMES) perceive the impact of financial, regulatory, technical,marketing, and other input constraints, and to evaluating theresults in relation to other empirical indicators. Lack of accessto finance emerges as the binding constraint for smaller, lessestablished firms in Sri Lanka and for all of Tanzania's SMES—notonly is informal financing limited for Tanzania's firms, evenfirms of adequate size and experience have difficulty borrowingfrom banks, and, if they do borrow, have difficult relationswith their lenders. In Tanzania, regulatory and tax constraintsappear largest for the smallest firms, declining somewhat asfirms grow: because enforcement is comprehensive, the bureaucraticburden of negotiating with government officials is greatestfor small firms. By contrast, in Sri Lanka the regulatory burdenrises with firm size, because enforcement is more stringentfor the larger and more visible firms. Constraints on physicalinputs continue to inhibit Sri Lankan SMES—a legacy ofexcessive vertical integration by parastatals. Technical constraintsare appraised as most significant by relatively educated entrepreneurswith some involvement in high-quality market niches.