Typescript (photocopy). / Digitized by Kansas Correctional Industries

This study provides evidence concerning the endogenous determination of managerial compensation contracts. To avoid the confounding effect of tax considerations, we limit our attention to the choice among long-term nonqualified incentive plans. Specifically, we consider a two-part decision faced by the firm: (1) whether to add an accounting-based "performance plan" to the existing portfolio of compensation contracts and (2) if the firm adopts a plan, the choice between a "relative" or an "absolute" performance measure. Based on some behavioral implications of performance plans which distinguish them from alternative contracts, we develop hypotheses which relate the adoption and design of a performance plan to the firm's general incentive contracting environment. We test these hypotheses using a choice-based sample, evenly divided between performance plan adopters and nonadopters. For the purposes of parameter estimation, we use the multinomial logit model to reflect the qualitative, hierarchical nature of the decision setting. Our results indicate that variables which proxy for the incentive environment can explain which firms will adopt a performance plan, and also the type of performance measure used by the adopting firms.

This study examined the effects of a productivity-indexed pay for performance plan in a professional services firm. The new plan was implemented after productivity decreased under an existing plan. Performance of staff and senior level accountants was analyzed across three departments under a three-year baseline and a two-year intervention period. Several measures of productivity indicated that the intervention was effective in improving production, especially for employees with full annual workloads. Percentage of salaries earned in incentives was comparable for both the baseline and intervention periods. Possible explanations for trends in the data, weaknesses in the plan, and implications for future research are also discussed.

A research report submitted to the Faculty of Management, University of the Witwatersrand, Johannesburg, in partial fulfilment of the requirements for the degree of Master of Management. 1994 / Organisations in South Africa are. paying out millions of Rands in financial incentives to executives without ,knowing conclusively whether or not company performance actually improves as a result of financial incentive schemes. Unions, tne media, workers, politicians and others are paying increasing attention to the levels of compensation that executives receive. The question being asked is whether these levels ate really necessary. This, the first research of its mud in South Africa, surveys the views of 121 top managers, from 17 organisations using incentive schemes, on the, impact of these schemes. There is convincing evidence that they are perceived to increase motivation and company performance, build teamwork and are effective in aligning the interests of managers and shareholders. The schemes are valuable in attracting, retaining and motivating executives" Given the complexity of setting executive remuneration, it is submitted. that there be no interference in the level of incentive scheme payouts. The factor analysis yielded a four factor solution, which was interpreted in terms of the literature review and constructs in the questionnaire. The first factor revealed that incentives are a motivator and increase company performance. The) build teamwork and are effective in aligning the interests of managers and shareholders. The second factor state; that incentives should be underpinned by openness and transparency. A fundamental principle behind this is that the relevant financial position should be known by all participants. It was also stated that the whole organisation i.e, all IfNels , should be on an incentive scheme, The third factor highlighted risk aversion in these executives and that basic salary is most important. The fourth factor, locus of control, stressed the importance of the scheme to the individual personally in terms of motivation, focus, reward, retention of services and the ability to control the incentive scheme payout. 111e surprising finding was the extent to which SA executives were risk averse and just how important the basic salary is. Guidelines, based on the factor analysis, content analysis and oo:rrespohd~nce analysis conducted on the questionnaires, ate offered to the designers incentive· schemes. Without correctly designed and aggressive incentive schemes the owners oforgamsations could expect very m.ediocre, "9 to S" type of commitment from their top·management team. Incentive schemes playa vital role in the design of com.petitive remuneration systems. Their importance should not be underestimated. / MT2017

Lai Ho King. / Summary of Chinese. / Thesis (M.B.A.)--The Chinese University of Hongkong. / Bibliography: l. 97-99.

Thesis. 1978. M.S.--Massachusetts Institute of Technology. Alfred P. Sloan School of Management. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND DEWEY. / Includes bibliographical references. / M.S.

Informational problems are prevalent in political organizations. To understand incentive structures, transparency and policy expertise in political organizations, we need to examine their informational problems. This collection of essays is a contribution to the theory and application of information revelation in political organizations. In Chapter 1, I develop a theory of office incentives in a setting in which agents’ effort is crucial for learning policy information. Many organizations, such as government agencies and NGOs, learn about policy effectiveness through de- centralized experimentation. However, unobserved effort by an agent can affect the outcome of an experiment, thus limiting its informativeness. A principal can improve the informativeness of an experiment by motivating the agent, using of- fice as an incentive. The principal may keep the agent in office only when the outcome of an experiment is good, thereby creating high-powered office incen- tives for the agent. High-powered office incentives motivate the agent’s effort in implementing the experiment in order to stay in office. However, they also reduce the agent’s expected informational benefits from experimentation, which can reduce the effort expended by the agent in implementing the experiment. The degree to which the agent values achieving organizational goals affects such trade-offs. I show that the principal is more likely to use high-powered incentives when the agent places a high value on achieving organizational goals and when multiple agents implement the same experiment. In Chapter 2, I analyze a model where an autocrat may choose transparency in disclosing information to members of ruling group, particular information per- taining to the effectiveness of valence-policy by her. The effectiveness of the au- tocrat’s policy directly reflects her competence. The members’ belief about auto- crat’s competence in valence-policy making affects their support. If the autocrat is transparent about policy effectiveness, particularly tell the truth of an ineffec- tive policy, a favorable message of policy effectiveness will be convincing. The members will support the autocrat upon receiving a favorable message thereby. However, transparency also means a higher frequency of unfavorable message which leads to the withdrawal of support by the members of ruling group. The model shows the effect of intra elite conflicts on transparency. When the rul- ing faction doesn’t depend much on the autocrat, the autocrat tends to be more transparent. Further, there is a non-monotonic relationship between the degree of ideological conflict among competing factions and transparency. As conflict increases, transparency increases up to a threshold. Beyond this threshold, in- creased conflict is associated with reduced transparency. In addition, the model has implications on quality of bureaucracies that gather and report information. Finally, in Chapter 3, I study how political polarization at the mass level af- fects politicians’ policy making in common value issues. In the model, politicians representing two groups of voters with divergent ideologies compete for office. Voters have limited information about policy as well as politicians’ competence in policy making. After observing the incumbent’s policy choice, voters make voting decisions. I study two variations of election. First, there is a majority group and a minority group in the society. Second, society is composed of two competitive groups. In both variations, I show that in a society with a high level of polariza- tion, the incumbent politician is more likely to exercise her expertise regarding common value issues.

Thesis supervisor: B Ravikumar. Includes bibliographic references (p. 132-135).

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This dissertation consists of three essays that explore economic issues on information security and risk management. In the first essay, we develop an economic mechanism which coordinates security strategies of Service Providers (SPs). SPs are best positioned to safeguard the Internet. However, they generally do not have incentives to take such a responsibility in the distributed computing environment. The proposed certification mechanism induces SPs to voluntarily accept the liability of Internet security. SPs who take the liability signal their capability in conducting secure computing and benefit from such recognition. We use a game-theoretic model to examine SPs' incentives and the social welfare. Our results show that the certification mechanism can generate a more secure Internet communication environment. The second essay studies the impact of cyberinsurance and alternative risk management solutions on firms' information security strategies. In the existing literature, cyberinsurance has been proposed as a solution to transfer information risks and reduce security spending. However, we show that cyberinsurance by itself is deficient in addressing the overinvestment issue. We find that the joint use of cyberinsurance and risk pooling arrangement optimizes firms' security investment. In the case with a large number of firms, we show that firms will invest at the socially optimal level. The third essay examines the information role of vendors' patching strategies. Patching after software release has become an important stage in the software development cycle. In the presence of quality uncertainty, we show that vendors can leverage the patch release times to signal the quality of their software products. We define a new belief profile and identify two types of separating equilibria in a dynamic setting.