Analyzing data from approximately 1.5 million employees across 1,108 established public and private US companies, we find that employee beliefs about their firm's purpose is weaker in public companies. This difference is most pronounced within the salaried middle and hourly ranks, rather than...

Prodded by economists in the 1970s, corporate directors began adding stock options and bonuses to the already-generous salaries of CEOs with hopes of boosting their companies' fortunes. Guided by largely unproven assumptions, this trend continues today. So what are companies getting in return...

I develop measures of firm-level pay disparity and examine their relation to firm performance. Using comprehensive compensation data for a large sample of firms, I find no statistically significant relation between the ratio of CEO-to-mean employee compensation and performance. I next create...

We investigate how mutual funds with environmental, social, and governance (ESG) objectives vote on shareholder proposals related to executive compensation. Using a sample of 94,695 votes by 2,354 mutual funds from 2012 to 2021, we find that ESG funds are 9.4% more likely than non-ESG funds to...

The hottest topic in corporate governance circles today involves company commitments to and pursuit of ESG (environmental, social, and governance) initiatives in addition to the traditional pursuit of profits. One facet of this debate has to do with how to motivate executives to pursue ESG...

We use firms’ discretionary choices in the CEO pay ratio disclosure to examine corporate decisions under social pressure. Reported pay ratios are significantly lower when firms use complex methods to identify the median employee, whose total pay is the denominator in the ratio. Firms choose...

The career concerns literature predicts that incentives for effort decline as beliefs about ability become more precise (Holmström, 1982/1999). In contrast, we show that effort can increase with belief precision if promotions to better-paid jobs make the returns to reputation non-linear. In...

In this study we analyze how CEO risk incentives affect the efficiency of research and development (R&D) investments. We examine a sample of 843 cases in which firms increase their R&D investments by an economically significant amount over the period of 1995–2006. We find that firms with...

We examine managerial compensation and wealth sensitivities around CEO changes. The average new CEO is incentivized to increase the risk of the firm primarily because he holds significantly less stock than his predecessor, and in fact riskier policy choices are subsequently implemented. Similar...