The influence of relative values of outside director stock options on firm strategic risk from a multiagent perspective

Lim, Elizabeth; McCann, Brian T.

doi:10.1002/smj.2088

Cited by 52 publications

(61 citation statements)

References 111 publications

(231 reference statements)

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“…We controlled for governance variables to account for agency effects on new market entry (see Lim and McCann, ). If the CEO is also responsible for board leadership position, we coded CEO duality one and zero otherwise.…”

Section: Methodsmentioning

confidence: 99%

“…The complexity of managerial tasks increases with new market entry due to a higher level of information processing when managing a portfolio of new geographic businesses (March and Simon, ). How top managers are rewarded for tackling the complexity of global firms matters (Lim, ; Lim and McCann, ). Yet, extant behavioural literature is significantly underdeveloped with respect to investigating the joint influences of attainment discrepancy and pay gaps across top managers within global firms.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

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Attainment Discrepancy and New Geographic Market Entry: The Moderating Roles of Vertical Pay Disparity and Horizontal Pay Dispersion

Lim

2018

J Management Studies

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Studies in the behavioural strategy literature have examined the influence of attainment discrepancy on new geographic market entry with inconclusive results. We clarified the relationship between attainment discrepancy and new geographic market entry by considering the moderating effects of managerial pay gaps with concentration on vertical pay disparity and horizontal pay dispersion. The framework also contributes to our understanding of tournament theory and social comparison theory by identifying specified performance contexts under which types of pay gaps conform to or violate theoretical predictions. Empirical analyses based on a panel data of Standard and Poor’s (S&P) 500 firms from 1996 to 2006 showed that our hypotheses are largely supported.

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Section: Methodsmentioning

confidence: 99%

Section: Theory and Hypothesesmentioning

confidence: 99%

Attainment Discrepancy and New Geographic Market Entry: The Moderating Roles of Vertical Pay Disparity and Horizontal Pay Dispersion

Lim

2018

J Management Studies

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“…Lim and McCann (2013) also use BAM to explain why the relationship between the positive deviation from prior outside director stock option values and risk taking weakens when CEO stock ownership is high and the CEO also holds the board chair position. Lim and McCann (2014) demonstrate that a high value of stock option grants to the CEO leads to less risk taking under both underperforming and overperforming conditions.…”

Section: Bam Research On Executive Compensation and Risk Takingmentioning

confidence: 99%

Managerial Risk Taking

Hoskisson

Chirico

Zyung³

et al. 2016

Journal of Management

256

132

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Managerial risk taking is a critical aspect of strategic management. To improve competitive advantage and performance, managers need to take risks, often in an uncertain environment. Formal economic assumptions of risk taking suggest that if the expected values for two strategies are similar but one is a greater gamble (uncertain), managers will choose the strategy with a more certain outcome. Based on these assumptions, agency theory assumes that top managers should be compensated or monitored to achieve better outcomes. We review the theory and research on agency theory and managerial risk taking along with theories that challenge this basic assumption about risk taking: the behavioral theory of the firm, prospect theory, the behavioral agency model and the related socioemotional wealth perspective, and upper echelons theory. We contribute to the literature by reviewing and suggesting research opportunities within and across these theories to develop a comprehensive research agenda on managerial risk taking.

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“…In Tables 2 and 4 we report the Hansen statistic and the tests for autocorrelation. Results indicate that instruments are valid and not correlated with the error terms (Lim & McCann, 2013;Vandaie & Zaheer, 2014) and there is no evidence of autocorrelation.NOT THE PUBLISHED VERSION; this is the author's final, peer-reviewed manuscript. The published version may be accessed by following the link in the citation at the bottom of the page.…”

mentioning

confidence: 90%

Do CEOs Ever Lose? Fairness Perspective on the Allocation of Residuals Between CEOs and Shareholders

Kolev

Wiseman

Gómez‐Mejía

2016

Journal of Management

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In this study we introduce a justice perspective to examining the result of bargaining between CEOs and boards over the allocation of firm residuals that ultimately determines CEO compensation. Framing CEO pay as the result of bargaining between CEOs and boards focuses attention on the power of CEOs to increase their share of firm residuals in the form of increased compensation, and the diligence of boards of directors to constrain CEO opportunism. Framing this negotiation through a theory of justice offers an alternative perspective to the search for pay-performance sensitivity. We predict and find that as board diligence in controlling opportunism declines and CEO power increases, CEOs are increasingly able to capture a larger portion of firm residuals relative to shareholders. This finding supports critics who charge that CEO pay violates norms of distributive and procedural justice.Keywords: CEO compensation, agency theory, board monitoring, distributive justiceFollowing agency theory prescriptions for controlling agency opportunism (e.g., Eisenhardt, 1989;Jensen & Meckling, 1976), corporate America increasingly adopted pay schemes that linked a portion of agent compensation to outcomes important to principals. For example, virtually 100% of CEOs' pay today includes some form of performance contingent pay. This widespread use of contingent pay has provoked a large escalation in the use of equity forms of compensation (particularly restricted stock and stock options) over the past 25 years. The use of equity forms of compensation was thought to tie executive pay more closely to shareholder wealth and led to hundreds of studies attempting to measure this link, generally known as pay-performance sensitivity (Gomez-Mejia & Wiseman, 1997).Corresponding to the increased reliance on equity-based pay is a greater increase in the amount of compensation awarded to senior executives, especially CEOs. For example, average CEO compensation rose as much as 614% in real dollars between 1980 and 2004 compared to a 7% rise in average worker pay over the same period (Bogle, 2008). Others have also noted extraordinary rise in CEO compensation in recent years, most of it due to increases in equity pay (Bebchuk & Grinstein, 2005;Frydman & Saks, 2010;Walsh, 2008). This rise in pay has not gone unnoticed by the media, who question the size of CEO pay packages by noting the growing disparity between NOT THE PUBLISHED VERSION; this is the author's final, peer-reviewed manuscript. The published version may be accessed by following the link in the citation at the bottom of the page. (June 4, 2014). DOI. This article is © SAGE Publications and permission has been granted for this version to appear in e-Publications@Marquette. SAGE Publications does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from SAGE Publications. Journal of Management, 3CEO pay and that of other segments of society (Deutsch, 2008;Morgenson, 2013). While agency theory provides a stro...

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The influence of relative values of outside director stock options on firm strategic risk from a multiagent perspective

Cited by 52 publications

References 111 publications

Attainment Discrepancy and New Geographic Market Entry: The Moderating Roles of Vertical Pay Disparity and Horizontal Pay Dispersion

Attainment Discrepancy and New Geographic Market Entry: The Moderating Roles of Vertical Pay Disparity and Horizontal Pay Dispersion

Managerial Risk Taking

Do CEOs Ever Lose? Fairness Perspective on the Allocation of Residuals Between CEOs and Shareholders

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