Baylor University Roundtable on The Corporate Mission, CEO Pay, and Improving the Dialogue with Investors

A small group of academics and practitioners discusses four major controversies in the theory and practice of corporate finance:

• • What is the social purpose of the public corporation? Should corporate managements aim to maximize the profitability and value of their companies, or should they instead try to balance the interests of their shareholders against those of “stakeholder” groups, such as employees, customers, and local communities?
• • Should corporate executives consider ending the common practice of earnings guidance? Are there other ways of shifting the focus of the public dialogue between management and investors away from near-term earnings and toward longer-run corporate strategies, policies, and goals? And can companies influence the kinds of investors who buy their shares?
• • Are U.S. CEOs overpaid? What role have equity ownership and financial incentives played in the past performance of U.S. companies? And are there ways of improving the design of U.S. executive pay?
• • Can the principles of corporate governance and financial management at the core of the private equity model—notably, equity incentives, high leverage, and active participation by large investors—be used to increase the values of U.S. public companies?

     

PRODUCT AND LABOUR MARKETS IN WAGE DETERMINATION: SOME AUSTRALIAN EVIDENCE

The study is concerned with the extent to which workplace wage drift is influenced by establishment-specific or occupation-specific factors. It demonstrates, by analysis of variance of pay data from a survey of 44 occupations in 198 workplaces, that the sources of variation are predominantly establishment-specific. There is evidence of a link between the amount of discretion an employer exercises in the labour market and the degree of concentration in his product market. It is argued that discussions of pay determination have been unduly preoccupied with labour market processes and have neglected the variation in employer behaviour arising from differences in product market.     

Stochastic growth: asymptotic distributions

Summary. This note studies conditions under which sequences of state variables generated by discrete-time stochastic optimal accumulation models have law of large numbers and central limit properties. Productivity shocks with unbounded support are considered. Instead of restrictions on the support of the shock, an “average contraction” property is required on technology. Received: August 27, 2001; revised version: January 9, 2002 RID="*" ID="*"The author thanks John Creedy and Rabee Tourky for helpful comments, and the Economic Theory Center, University of Melbourne for financial support.     

A comparative analysis of multiattribute attitude models

In the consumer behavior context, multiattribute attitude models used to predict consumer choice in multiple criteria decision making situations have produced mixed results. Prediction of consumer behavior from attitudes, consequently, has been highly debated in recent years with researchers using beliefs-only, full, and extended multiattribute attitude models. The research underlying this paper was designed to compare the predictive superiority of the beliefs-only model, the full multiattribute attitude model, and a new representation identified as the combined multiattribute/determinant attribute attitude model. Data concerning patronage of fast-food chains were collected from a student panel for seven weeks. Predictive superiority was determined by average adjusted R² using the patronage behavior dependent variable. All models were tested in aggregated and disaggregated form.     

Evaluation of medical costs associated with use of new oral anticoagulants compared with standard therapy among venous thromboembolism patients

Objective:

This study evaluated differences in medical costs associated with clinical end-points from randomized clinical trials that compared the new oral anticoagulants (NOACs), dabigatran, rivaroxaban, apixaban, and edoxaban, to standard therapy for treatment of patients with venous thromboembolism (VTE).

Research design and methods:

Event rates of efficacy and safety end-points from the clinical trials (RE-COVER, RE-COVER II, EINSTEIN-Pooled, AMPLIFY, Hokusai-VTE trial) were obtained from published literature. Incremental annual medical costs among patients with clinical events from a US payer perspective were obtained from the literature or healthcare claims databases and inflation adjusted to 2013 costs. Differences in total medical costs associated with clinical end-points for the NOACs vs standard therapy were then estimated. One-way and Monte Carlo sensitivity analyses were carried out.

Results:

A lower rate of major bleedings was associated with use of any of the NOACs vs standard therapy. Except for dabigatran, use of NOACs was also associated with a lower rate of recurrent VTE/death. As a result of the reduction in clinical event rates, the overall medical cost differences were ?$146, ?$482, ?$918, and ?$344 for VTE patients treated with dabigatran, rivaroxaban, apixaban, and edoxaban, respectively, vs patients treated with standard therapy.

Conclusions:

When any of the four NOACs are used instead of standard therapy for acute VTE, treatment medical costs are reduced. Apixaban is associated with the greatest reduction in medical costs, which is driven by medical cost reductions associated with both efficacy and safety end-points. Further evaluation may be needed to validate these results in the real-world setting.     

Competition and physician-enabled demand: The role of managed care

Recent organizational changes in the health care sector promote greater patient participation in their treatment decisions. How physicians respond to patient-initiated requests for treatment is an issue of considerable policy interest. To study this phenomenon, we introduce the notion of physician-enabled demand and examine empirically whether this behavior responds to competitive pressures in the market and financial incentives associated with different physician payment mechanisms.We find that physician-enabled demand increases with more competition under fee-for-service reimbursement, but decreases with greater competition under managed care. This asymmetric response is quite consistent with our conceptual framework and at odds with alternative interpretations.     

The Redistributive Effects of a Minimum Wage Increase in New Zealand: A Microsimulation Analysis

This paper examines the potential effects on inequality and poverty of a minimum wage increase, based on a microsimulation model that captures the details of household composition and the income tax and welfare benefit system and allows for labour supply responses. Results suggest that, largely due to the composition of household incomes, a policy of increasing the minimum wage has a relatively small effect on the inequality of income per adult equivalent person, and a money metric utility measure, using several inequality indices. Hence, the minimum wage policy does not appear to be particularly well targeted, largely due to many low wage earners being secondary earners in higher income households, while many low income households have no wage earners at all. These results are reinforced when allowing for wage spillovers further up the wage distribution. Nevertheless, a minimum wage increase can have a more substantial effect on some poverty measures for sole parents in employment.