Showing papers on "Remuneration published in 2004"

Remuneration: Where We've Been, How We Got to Here, What Are the Problems, and How to Fix Them

Abstract: Currently, we are in the midst of a reexamination of chief executive officer (CEO) remuneration that has more than the usual amount of energy and substance. While much of the fury over CEO pay has been aimed at executives associated with accounting scandals and collapses in the prices of their company's shares, the controversies over GE CEO Jack Welch and NYSE CEO Richard Grasso signal a watershed. In their cases the competence and performance of both men were unquestioned: the issue seems to be the perception that they received "too much" and that there was inadequate disclosure. We provide, history, analysis and over three dozen recommendations for reforming the system surrounding executive compensation. Section I introduces a conceptual framework for analyzing remuneration and incentives in organizations. We then analyze the agency problems between managers and shareholders and between board members and shareholders, and discuss how well designed pay packages can mitigate the former while well designed corporate governance policies and processes can mitigate the latter. We say "mitigate" because no solutions will eliminate these agency problems completely. Since bad governance can easily lead to value destroying pay practices our discussion includes analyses of corporate governance as well as pay design. Because optimal remuneration policies cannot be designed and managed without consideration of the powerful relations and interactions between the financial markets and the firm, its top-level executives and the board, we devote significant space to these factors. Section II offers a brief history of executive remuneration from 1970 to the present. Section III examines and explains the forces behind the US-led escalation in share options. We argue that boards and managers falsely perceive stock options to be inexpensive because of accounting and cash-flow considerations and, as a result, too many options have been awarded to too many people. Section IV defines and discusses the agency costs of overvalued equity as the source of recent corporate scandals. Agency problems associated with overvalued equity are aggravated when managers have large holdings of stock or options. Because neither the market for corporate control or the usual incentive compensation systems can solve the agency problems of overvalued equity, they must be resolved by corporate governance systems. And few governance systems were strong enough to solve the problems. As the overvalued equity problem illustrates, while remuneration can be a solution to agency problems, it can also be a source of agency problems. Section V discusses several widespread problems with pay processes and practices, and suggests changes in both corporate governance and pay design to mitigate such problems: including problems with the appointment and pay-setting process, problems with equity-based pay plans, and problems with the design of traditional bonus plans. We show how traditional plans encourage managers to ignore the cost of capital, manage earnings in ways that destroy value, and take actions to deceive investors and capital markets. Section VI defines and analyzes a new concept: what we call the Strategic Value Accountability issue. This is the accountability for making the link between strategy formulation and choice and the value consequences of those choices - basically the link between internal managers and external capital markets. The critical importance of this accountability, its assignment, and its implications for performance measurement and remuneration have long been unrecognized and therefore ignored in most organizations. Section VII analyzes the complex relationships between managers, analysts, and the capital market, the incentives firms have to manage earnings to meet or beat analyst forecasts, and shows how managers playing the earnings-management game systematically erode the integrity of their organization and destroy organizational value. We highlight the puzzling equilibrium in this market that seems to suggest collusion between analysts and managers at the expense of investors - an area that is ripe for further research.

HRM, Work and Employment in China

Abstract: 1. Introduction 2. Employment Relations in China and Its Institutional Context 3. Reforms of the Personnel System in the State Sector 4. Pay Systems and Recent Remuneration Schemes 5. Vocational and Enterprise Training Systems 6. Gender Equality Policy and Practice in Employment and Management 7. Minimum Wage and Implications for Equality in Employment 8. Employment Relations in Private Small Firms 9. HRM in China: Recent Developments 10. The Future Prospects of HRM, Work and Employment in China

Supporting Workplace Learning for High Performance Working

Abstract: In this book, written by David Ashton and Johnny Sung, the ILO is responding to the widespread interest in learning and training in high performance work organizations (HPWOs) and has taken up the challenge of identifying and documenting these innovative practices. The book looks at many aspects of workplace learning and training and considers these aspects from the perspective of workers as well as employers, including the prospective benefits for the different parties. It also examines the role governments can play in fostering high performance work practices and, in particular, encouraging enterprises to make better use of their employees’ skills. This book contributes to the ILO’s strategic objective of creating greater opportunities for women and men to secure decent work. The HPWOs create the scenario for a win-win outcome: the companies benefit through increased productivity, and the employees gain through improved quality of working life – decent employment – and increased remuneration compared to more traditional enterprises. The recent research, for the first time, shows how high performance work practices increase productivity. The book also shows that employees in HPWOs often have more stable employment and that equity issues are dealt with in a more open and fair manner due to the commitment of managers and workers alike. Mutual trust is an essential element of high performance work practices.

Compare and Contrast: Perspectives on Board Committees

Abstract: The establishment of board sub-committees has been strongly recommended as a suitable mechanism for improving corporate governance, by delegating specific tasks from the main board to a smaller group and harnessing the contribution of non-executive directors. In the UK, the Cadbury committee proposals focused on audit committees and the Greenbury study group advocated remuneration committees. Over the last decade, most large public companies have set up such committees, but their impact on governance standards has not been widely explored. This paper identifies significant differences in the orientation and operation of these committees. It also draws on interview data collected from participants in audit and remuneration committees to argue that these differences may lead to unacknowledged pressures on non-executive directors who form the membership of both committees. Given the current focus on the role of non-executive directors, the impact of such pressure is of particular importance.

Corporate Heroin: A Defense of Perks

Abstract: We argue that firms undertake to reduce employee savings in order to avoid final period problems that occur when employees accumulate enough wealth to retire and leave the industry. Normally, reputation constrains employee behavior, since an employee who “cheats” at one firm will then find herself unable to get a job at another. However, employees who have saved such that they no longer care about continued employment will act opportunistically in the final periods of employment, which can destroy much or all of the surplus otherwise created by the employment relationship. We believe that this sort of final period cheating creates significant problems for employees in positions of delicate trust, particularly those with a large variable compensation component, such as corporate CEOs, securities professionals, and even corporate lawyers. Payment in-kind (perks), deferred compensation (corporate loans), and the encouragement of employees’ conspicuous consumption—either through screening, inculcation, or signaling—are strategies that firms enact to combat this final period problem of employee cheating. Employees who reduce savings are more reliable over the long term than employees who do not, since reduced savings makes employees more dependent upon remaining employed into the future; these employees will invest in their reputations by engaging in less cheating. We make an analogy to drug dependency: the employee who consumes all her resources immediately enjoys large present utility, as does the addict, but is ultimately dependent on the firm to provide her with the same opportunities in the future. Applying the theoretical framework we develop to the real world can help explain much of observable behavior and compensation practice. Thus, far from being prima facie evidence of corporate fraud—the picture painted by the media, academia, and prosecutors at recent corporate trials—high levels of in-kind compensation, corporate loans, and personal consumption may be evidence of optimal incentivization, where principal and agent have contracted (explicitly or implicitly) for just the amount and type of remuneration that maximizes their joint welfare. † Forthcoming, Georgetown Law Journal, 2005. * Visiting Assistant Professors of Law, University of Chicago Law School. For helpful comments and conversations on prior drafts, the authors would like to thank Lucian Bebchuk, Adam Cox, Richard Epstein, Jody Kraus, Saul Levmore, Jennifer Mnookin, Eric Posner, Lior Strahilevitz, Cass Sunstein, Al Sykes, and Rip Verkerke, as well as participants in workshops at the law schools of George Mason University and the University of Chicago.

Compare and Contrast: perspectives on board committees

Abstract: The establishment of board sub-committees has been strongly recommended as a suitable mechanism for improving corporate governance, by delegating specific tasks from the main board to a smaller group and harnessing the contribution of non-executive directors. In the UK, the Cadbury committee proposals focused on audit committees and the Greenbury study group advocated remuneration committees. Over the last decade, most large public com-panies have set up such committees, but their impact on governance standards has not been widely explored. This paper identifies significant differences in the orientation and operation of these committees. It also draws on interview data collected from participants in audit and remuneration committees to argue that these differences may lead to unacknowledged pressures on non-executive directors who form the membership of both committees. Given the current focus on the role of non-executive directors, the impact of such pressure is of particu-lar importance.

Holding China Together: The Cadre Evaluation System at the Grass Roots: The Paradox of Party Rule

Abstract: The Chinese party-state shares with other large, hierarchical organizations significant agency problems; local agents of the state tend to behave opportunistically, contrary to the interests of their principals.1 Such agency problems stem from conflicts of interest between principals and agents and from information asymmetries that typically characterize principal-agent relations.2 State officials in China employ a formal evaluation system (kaohe zhidu) to control the behavior of their subordinates. Drawing on principal-agent theory, this paper contends that the nature of the evaluation system helps to explain dysfunctional aspects of policy implementation at the grass roots and that problems with policy implementation, in turn, help to explain subsequent changes in the evaluation system itself. This characterization is consistent with adaptive learning on the part of principals. In the final section, the chapter argues that, paradoxically, even as the evaluation system has exacerbated problems in policy implementation, it has simultaneously contributed to the durability of rule by the Chinese Communist Party (CCP). Indeed, the relative stability of CCP rule, in contrast to the loss of power by communist parties in other former socialist states and contrary to claims of pervasive political decay in China,3 demands explanation. The chapter begins by providing some background on the development of the cadre evaluation system since the initiation of reform in 1978, arguing that changes in cadre evaluation represent an early and important element

Will mp3 downloads annihilate the record industry? the evidence so far

Abstract: This paper investigates the impact of peer-to-peer networks that promote the unauthorized downloading of MP3 files exert on the recording industry. Although Napster was the most famous of these systems, its progeny have continued to allow millions of music listeners to download music (and other) files without remuneration to the copyright owners. Economic theory does not allow us to determine what the impact of such downloading will be. Using data on the historical sales of prerecorded music I examine in detail the recent decline in record sales and attempt to gauge the importance of various factors that have been put forward to explain this decline. My conclusion is that the evidence is most consistent with a claim that MP3 downloads decrease sales. Nevertheless, it is unclear whether the damage to the industry will be fatal.

Luck, Effort, and Reward in an Organizational Hierarchy

Abstract: Using the personnel records of a large British financial sector employer we investigate how workers respond to remuneration differences and “luck” in the promotion system. The results confirm that workers respond to larger remuneration spreads by working harder. Increased certainty in the promotion process also has this effect. There appears to be no difference between men’s and women’s reactions to promotion incentives. Gender differences in the raw data therefore appear not due to incentives. We need to look elsewhere for an explanation.

The influence of human resource management practices on the retention of core employees of Australian organisations : an empirical study

Abstract: Employee retention is one of the challenges facing many business organisations today. For many organisations, strategic staffing has become a concern because the ability to hold on to highly talented core employees can be crucial to future survival. This empirical study examined the current human resource management (HRM) practices of Australian organisations in the retention of their core employees. In particular, the research identified the core elements of HRM practices, which strongly influence the decision for core employees to stay. The study comprise three phases: (1) a preliminary investigation, utilising the Delphi Technique to obtain the opinions of an expert panel of thirteen, (2) in-depth interviews, involving twelve human resource managers of Australian organisations and (3) a quantitative survey of 800 employees from nine Australian organisations. The findings revealed greater insights into the HRM-retention relationship and provided empirical validation of the relationship. More specifically, the research identified eight retention factors that influence the decision of core employees to stay. These specific factors consisted of two bundles of practices: HR factors (e.g., person organisational fit, remuneration, reward and recognition, training and career development, challenging job opportunities) and Organisational factors (e.g., leadership behaviour, company culture and policies, teamwork relationship and satisfactory work environment). The outcome of the HRM-retention relationship was examined through organisational commitment and turnover intention using multiple regression analysis. The findings of this study revealed positive significant co-relationships between the eight factors and organisational commitment. Moreover, it was highlighted that commitment acted as a partial mediator of remuneration, recognition and reward, training and career development and work environment on intent to stay. Commitment fully mediated the relationship person organisational fit, teamwork relationship, culture and policies and intention to stay. The study produced a model suitable for use by human resource practitioners as a guide in determining what initiatives an organisation should adopt to retain their critical employees. This research has also made a contribution by illuminating the current employment relationships in Australian organisations and providing relevant empirical evidence to support the theoretical model of Human Resource Architecture, developed by Lepak and Snell (1999) and, as a result, creating a configuration for an Australian Human Resource Architecture model.

Can Corporate Governance be Rated? Ideas Based on the Greek Experience

Abstract: The paper presents an attempt to quantify the compliance of Greek companies with international best practices. Based on 37 indicators (composed out of 54 questions) it was found that Greek companies demonstrate a fairly satisfactory degree of compliance with OECD guidelines. Their weak points lie in: the role of stakeholders and corporate social responsibility; the organisation of CG; the effective role of the independent members of the board (which may be attributed to the small size of the pool of potential independent board members); disclosure of remuneration; and risk management. Methodologically, the merit of the exercise lies in its approach towards the creation of "collectively subjective" weightings, an effort to discuss the benefits of separating the rating of the market from the rating of companies and the discussion on typologies of work that can be effectively performed through rating exercises.

Between glass ceilings: Female non-executive directors in UK quoted companies

Abstract: The Higgs Review and the Tyson Report have drawn attention to board independence, the lack of female directors and the potential positive contribution of female participation to UK corporate governance. This paper examines the situation of female directors in the top 350 UK quoted companies in the context of recent debates about occupational gender differences and corporate governance. In particular, female non-executive directors account for just over 6 per cent of the non-executive directors and receive about two-thirds the remuneration of their male counterparts. Although female participation increases with firm size, the gender wage gap widens. More importantly, it was found that female nonexecutive directors are at a disadvantage in gaining promotions to positions such as chair of important board sub-committees (ie, the audit committee, the nomination committee and the remuneration committee) and as chairman of the board itself. Given that, in most companies, non-executive remuneration is related to the holding of such posts, this appears to be an important factor in explaining differences in non-executive remuneration. Exclusion of females from these powerful positions also suggests that women face a ‘second glass ceiling’ even after reaching board level. However, the latest version of the Combined Code on Corporate Governance now provides a valuable opportunity for UK company boards to address the issue of gender imbalance and independence on boards of directors.

Can Corporate Governance be Rated? Ideas based on the Greek experience

Abstract: The paper presents an attempt to quantify the compliance of Greek companies with international best practices. Based on 37 indicators (composed out of 54 questions) it was found that Greek companies demonstrate a fairly satisfactory degree of compliance with OECD guidelines. Their weak points lie in: the role of stakeholders and corporate social responsibility; the organisation of CG; the effective role of the independent members of the board (which may be attributed to the small size of the pool of potential independent board members); disclosure of remuneration; and risk management. Methodologically, the merit of the exercise lies in its approach towards the creation of “collectively subjective” weightings, an effort to discuss the benefits of separating the rating of the market from the rating of companies and the discussion on typologies of work that can be effectively performed through rating exercises.

Application service provider model for manufacturers product specification data

Abstract: A business model is described in which one entity hosts, maintains, and provides a uniform interface for entering data into, a database of manufacturers product specification on behalf of a plurality of manufacturers. The entity then serves as an application service provider (ASP) with respect to that database, by allowing the manufacturers to access their respective product specification data in the database for any of a variety of uses outside of the database in exchange for some form of remuneration from those manufacturers.

Getting Research into Clinical Practice - Barriers and Solutions

Abstract: The success of current efforts towards evidence-based health services in many countries depends on efficient transfer of research findings to health practitioners. However, there is a lag in research being adopted. In part this is due to difficulties in interpreting or generalising research findings, in part to inertia, organisational structures and information. Clinical guidelines are usually cited as being the most effective product of evidence assessment and means of getting research into practice. The processes by which they are prepared and disseminated are discussed. Current clinical practice requires that health professionals adapt to changing systems and adopt new techniques. Therefore, in future, practice research to evaluate (a) clinical interventions and (b) dissemination and implementation strategies will become increasingly important. Recognised barriers to such research include lack of interest, lack of involvement, lack of time and lack of remuneration. High-quality research in dental primary care requires academics and dental service providers working in partnership on topics that are relevant both to clinicians and policy makers. Good project management, education and training are essential.

Board composition, executive remuneration, and corporate performance: the case of reits

Abstract: This study strives to take an extra step to sharpen the comprehension of one aspect of agency theory as well as to extend previous research by examining the role of board of directors and managerial remuneration in enhancing corporate performance in the REITs industry. The main hypothesis in this study will be twofold. First, managerial remuneration is related to corporate performance. Second, the ratio of outside directors is related to corporate performance. This study will use a sample of REIT firms as of the end of 1996. The sample will consist of the actively traded REITs listed in the public stock exchanges. The final sample that meets all the criteria includes 167 REITs. The results indicate that there is a negative relationship between cash managerial remuneration and firm performance. Moreover, this study confirms a nonlinear relationship between board size and firm performance. The relationship is negative when board size is small, and it turns positive when board size grows.

Do Wages Rise or Fall Following Merger

Abstract: This paper provides a systematic empirical analysis of the effects of merger and acquisition activity on profitability and firm-level employee remuneration in the UK, using a specially constructed database for the period 1979-91 It finds that both profitability and wages rise following acquisition, and firms that merge within the same industry division experience larger increases in profitability and pay their workers higher wages than those engaged in unrelated acquisitions; ie in part, the result of an increase in the efficiency with which labour is used following related acquisition

The management of the early stages of restructuring in a tertiary-education institution: An organisational commitment perspective

Abstract: Restructuring in business firms is often characterised by uncertainty, anxiety, low morale, tardy job performance and high levels of absenteeism and staff turnover. Restructuring has recently been extended to tertiary education, but its effects on the higher education environment have not been thoroughly investigated. This study investigates the impact of restructuring (mergers) on the organisational commitment, job performance and intent to resign of tertiary education staff, as well as the relationship between selected antecedents (commitment to top management and satisfaction with career factors, monetary remuneration, fringe benefits, relations with peers and growth needs) and organisational commitment. The results show that the respondents, during the early stages of restructuring, exhibit low levels of organisational commitment, commitment to top management and satisfaction with monetary remuneration, fringe benefits and career factors. They also report high levels of satisfaction with growth factors (opportunities for training and development), relations with peers and performance intentions, and low levels of intentions to resign. Multiple regression analyses reveal that organisational commitment is positively related to performance intentions and negatively related to intent to resign. The results also show that commitment to top management and satisfaction with fringe benefits, peer relations and career factors were positively related to organisational commitment. Neither satisfaction with monetary remuneration nor the satisfaction of growth needs was significantly related to organisational commitment. The managerial implications of these findings are discussed.

U.K. Executive Compensation Practices: New Economy versus Old Economy

Abstract: This paper examines the executive compensation practices of listed U.K. retailing companies. We compare “New Economy” retailers (e‐commerce/dot‐coms) to more traditional retailers operating in the “Old Economy.” We also discriminate between recently floated retailers and their more seasoned counterparts. Using a sample of remuneration contracts for 549 directors in 72 listed U.K. companies in the New and Old Economies, we investigate the structure and level of executive (and nonexecutive) compensation defined as the sum of salary, annual bonus, and the values of executive stock options and long‐term incentive plans (LTIPs). We investigate the extent to which the contract features are determined by firm characteristics, economic sector, and governance/ownership factors. In contrast to the U.S., where almost all executive stock options are issued at the money, there is a greater variety of practice in the U.K. with some options being granted substantially in the money. We therefore pay special attention to ...

Do Wages Rise or Fall Following Merger

Abstract: This paper provides a systematic empirical analysis of the effects of merger and acquisition activity on profitability and firm-level employee remuneration in the UK, using a specially constructed database for the period 1979-91. It finds that both profitability and wages rise following acquisition, and firms that merge within the same industry division experience larger increases in profitability and pay their workers higher wages than those engaged in unrelated acquisitions; i.e. in part, the result of an increase in the efficiency with which labour is used following related acquisition.

Balancing Self-Interest and Altruism: Corporate Governance Alone is Not Enough

Abstract: Governance has become a topic of unprecedented emotional significance and fundamental importance in the boardrooms of companies, partly as a result of a confluence of early 21st century corporate scandals, stock market falls and public rage about senior executive remuneration. A simple adherence to formal systems of corporate governance, in terms of structures, rules, procedures and codes of practice, whilst a starting point, will not alone win back confidence in markets and corporations. Consideration needs to be given to how to release entrepreneurial self interest within a moral context. This focuses attention on the role of other major social institutions which may more naturally be able to nurture a moral framework as well as the role of individual citizens and the responsibility of all of us to enact a moral framework for business activities. There is no escape from individual moral responsibility, and our part in creating and sustaining social institutions beyond corporations.

Aspects of Training and Remuneration in the Accommodation Industry: A Comparison between Australian and Singaporean Providers.

Abstract: It has long been recognised that effective staff training and remuneration allows an organisation to provide a unique and differentiating standard of service in industry, resulting in increased profitability to service providers. The purpose of this research study is to investigate the training strategies, and hence the training profile, of organisations within the accommodation sector. The extent and role of training and remuneration is examined in local independent accommodation providers, and then compared to the larger, chain operations. The quantitative findings are complimented with qualitative research undertaken through interviews with human resource (HR) managers from a number of international hotels in both Perth and Singapore. This mixed method of analysis approach is used to determine the extent of relationship between local accommodation providers and international chains. HR practices in the industry were viewed in Singapore as being very traditional in both the multi‐chain hotels, failing to keep up with new practices and technology, and focusing on administrative rather than strategic goals. No comments on practices in Australia were forthcoming, but it is probable that practices are also very traditional.

Reputation – Managing the single greatest risk facing business today

Abstract: Reputational risk is now considered the single greatest threat to businesses today. Most companies, however, are still not managing this risk appropriately. This paper argues that following the recommendations of the Turnbull Report into boardroom responsibility for risk management and accountability for intangible assets such as reputation, and the Higgs Review of corporate governance recommending a more active and independent role for non‐executive directors (NEDs), NEDs should be appointed as reputation guardians for the corporation – in much the same way as they now sit on audit, nomination and remuneration committees. This recommendation is given added weight by the proposed implementation of the Operating and Financial Review (OFR) in 2004, which, inter alia, seeks to embed reputational enhancement and protection in corporate reporting. NEDs will need a powerful strategic management tool (stakeholder audits) to ensure that they can perform this task properly. They will also need the support of an experienced communications function which will be critical in conducting, interpreting and advising on appropriate courses of action arising from the stakeholder audit.

Balancing Self-interest and Altruism: corporate governance alone is not enough

Abstract: Governance has become a topic of unprecedented emotional significance and fundamental importance in the boardrooms of companies, partly as a result of a confluence of early 21st century corporate scandals, stock market falls and public rage about senior executive remuneration. A simple adherence to formal systems of corporate governance, in terms of structures, rules, procedures and codes of practice, whilst a starting point, will not alone win back confidence in markets and corporations. Consideration needs to be given to how to release entrepreneurial self interest within a moral context. This focuses attention on the role of other major social institutions which may more naturally be able to nurture a moral framework as well as the role of individual citizens and the responsibility of all of us to enact a moral framework for business activities. There is no escape from individual moral responsibility, and our part in creating and sustaining social institutions beyond corporations.

Executive Remuneration and Corporate Governance in the EU: Convergence, Divergence, and Reform Perspectives

Abstract: This article examines the current controversy as to the effectiveness of executive remuneration as a tool of corporate governance but places the analysis in the particular context of the dispersed ownership/blockholding ownership faultline which runs across European corporate governance. It reveals that there is a close relationship between governance systems and the sophistication and rigour of the regulatory response to executive remuneration. To place the European responses to the executive remuneration question in context, Part I sets out the main theoretical arguments which frame the executive remuneration debate and examines the link between remuneration and corporate governance. Part II examines, in the light of the preceding discussion, the regulatory strategies adopted by EU Member States with regard to executive remuneration and reveals the extent to which their responses track corporate governance systems in terms of sophistication and degree of intervention in remuneration practices, particularly with respect to disclosure. Overall, regulatory strategies focus on company disclosure and corporate governance structures, and are grounded both in public regulation and in corporate governance best practices. Part III discusses reform perspectives with particular reference to the 2002 Winter Report and the 2003 Company Law Action Plan.

Knowledge Sharing Culture: A Case Study

Abstract: This paper reports a case study of a knowledge sharing culture in a large Australian consulting firm, Deloitte. An exploratory study was conducted to examine the extent to which knowledge sharing behaviour occurs within Deloitte and its relationships with the firm's core values, structures and practices. The study identified widespread knowledge sharing behaviour as demonstrated by a high degree of communication and collaboration activities. It also identified the firm's core values and corresponding procedures that cultivated trust, redundancy, staff empowerment, motivation and remuneration. Structures and practices were also found to convey a high degree of leadership commitment and provision for continuous learning.

The new ruthless economy: work and power in the digital age - Book Review

Abstract: T here are those who continue to look upon the heady days of the midto late-1990s with nostalgia, and then there’s Simon Head. Having spent much of the past decade investigating the ins and outs of the “new economy” as it emerged and evolved, Head views the record economic growth of the period more with trepidation than unbridled enthusiasm. For he has managed, it seems, to remember what many would rather forget: real wages remained virtually stagnant for the overwhelming majority – some 80 percent – of the American workforce throughout the 1990s boom, even as labor productivity soared and unemployment bottomed out. In The New Ruthless Economy, Head seeks to explain this troubling anomaly. It isn’t due to globalization – that, he contends, is an external phenomenon largely confined to the dwindling manufacturing sector. Instead, it’s due to internal pressures within the service sector, that nebulous aggregation of non-manufacturing industries in which most of America toils. Specifically, Head claims that wages have stagnated within these industries because of their wholesale adoption of workplace practices characteristic of the old manufacturing economy. Under the guise of “reengineering” or “enterprise resource planning,” modern-day Taylorists have spent the better part of the past decade applying the principles of scientific management and enforcing the ethos of mass production within the service sector. Bolstered by new information technologies, the resulting regimes have stripped service workers of most of their skills and rendered tenuous their position within the American job market. Wages and benefits, Head concludes, have suffered accordingly. Based upon a decade’s worth of fieldwork within the manufacturing and service sectors, coupled with primary and secondary research into the relevant literature, his analysis begins with a historical overview of the technological and organizational roots of mass production and scientific management in the nineteenth and early twentieth centuries. Clearly intended to bring outsiders up to speed, economic and technological historians will find nothing new in Head’s concise overview of the subject. Having established the basics, he then proceeds with a chapter focusing on the ways in which the principles of scientific management and mass production have survived in the automobile industry during the course of the twentieth century, both in the United States and in Japan. Here, he argues that the much-vaunted “Japanese model” of industrial practice differs little in reality from traditional Fordism – again, nothing new for specialists familiar with the literature, but useful nevertheless for setting up the rest of his argument. Next, Head explores what amounts to a dead-end within the history of scientific management in the United States, detailing early efforts to routinize service jobs that ultimately failed for lack of effective supervisory mechanisms. With its fifth and sixth chapters, Head’s analysis finally begins to come into its own as he explains the ways in which consultants and software engineers, under the banner of “reengineering,” first began to apply the precepts of the “Japanese model” of industrial practice to the American service industry. Having already established the essential affinity between this model and traditional Fordism in an earlier chapter, Head argues that when the service industry looked to Japan in the early 1990s, it simply re-introduced the same principles of scientific management and mass production that it had failed to apply to its operations years and years ago. The difference, however, was that this time, the sophisticated information technologies of the early 1990s enabled the application of industrial practice to the service industry to succeed. Head then details the results of these reengineering efforts, first from the perspective of upperand middle-management, and then from that of rank-and-file employees. Chapters seven and eight deal with the application of this industrial practice to the health care industry, where doctors and nurses have begun to experience the pressures of reengineering, and chapter nine explores the ways in which these reengineering efforts, disguised as “enterprise resource planning,” have begun to erode the skills of lowerand middle-management as well. Finally, Head concludes his effort with a suggestive chapter in which he explores some of the many

Incentive Effects of Bonus Payments: Evidence from an International Company

Abstract: This study uses panel data describing about 6,500 employees in a large international company to study the incentive effects of performance related pay. The company uses two performance related remuneration mechanisms. One is an individual "surprise" bonus payment. The other is a more structured system, where part of the salary is determined by individual performance evaluations. We hypothesize that effort is higher in departments where (i) performance evaluation results are more spread out, (ii) person-specific performance evaluations are more flexible over time, (iii) surprise bonuses are used more frequently. These hypotheses are tested using days of absence and overtime work as effort indicators. The tests yield that hypotheses (ii) and (iii) are supported, and that (i) cannot be tested reliably due to possible simultaneity bias in our data. We investigate and confirm the robustness of these findings. They suggest that surprise bonus payments and flexibility in the evaluation of individual performances over time provide effective incentives for employee effort.

Does marriage improve the wages of men and women in Australia

Abstract: It has often been observed that married men have higher wages than unmarried men, in what is described as a ‘marriage premium’. For women, the evidence is much less conclusive, with various researchers reporting positive but small, or zero or even negative effects of marriage on women’s remuneration. We explore these issues in Australia using data from the HILDA survey collected in 2001. Our finding for men is consistent with the bulk of other evidence, and for women we find a smaller but nevertheless substantial positive premium. We further examine the concept of ‘marriage’, which has broadened in recent years, and explore the differences in wage outcome between legal-, de facto- and ex-marriage states. There is never a significant difference in the premium between men in the various marriage states, while for women the differences between marriage states are numerically large and sometimes statistically significant.