It is known that no public goods mechanism can be Pareto efficient in Nash equilibrium, individually rational (IR), simple (using a one-dimensional message space), and dynamically stable. The Walker mechanism satisfies all but stability, while the Groves-Ledyard mechanism satisfies all but IR. Here we show that a hybrid between these two mechanisms maintains all of the properties of the Groves-Ledyard mechanism, but with fewer IR failures in expectation.

The authors investigate what determines differences in change in pay between men and women executives who move to new employers. Using proprietary data of 2,034 executive placements from a global search firm, the authors observe narrower pay differences between men and women after job moves. The unconditional gap shrinks from 21.5% in the prior employer to 15% in the new employer. After controlling for typical explanatory factors, the residual gap falls by almost 30%, from 8.5% at the prior employer to 6.1% in the new placement. This change reflects a relative increase in performance-based compensation for women and a lower level of unexplained pay inequality generally in external placements. Controlling for individual fixed effects, observed women have higher pay raises than do men. Finally, the authors find suggestive evidence that pay differences may also be moderated by differences in the supply and demand for women executives.

Changing employers can help narrow the gender gap in executive compensation.

This paper uses a proprietary panel dataset to categorize and quantify the activities that sell-side brokerage analysts use to build and sustain their network of buy-side client relations. We then examine the marginal impact of these activities on key analyst outcome metrics identified by prior literature. Our findings highlight the importance of two previously unstudied client-service activities—high-touch phone calls and non-deal road shows—and suggest that analysts may face a tradeoff between producing accurate earnings research and increasing the values of key performance measures that gauge the strength of their network of client relations.

We contribute to the growing literature on the effectiveness of corporate boards by examining the effect of two insights that have been largely unexplored in prior studies that use public data. First, since boards’ responsibilities are wide-ranging, more holistic performance measures may better capture the full range of their duties than specific public actions and outcomes (e.g., disclosure of risk management processes, financial restatements, acquisition returns, CEO turnover). And second, because corporate boards share many characteristics of other types of teams, their effectiveness is likely to be influenced by their internal operations. To examine the performance effects of these insights, we use data from 577 directors of U.S. public firms that responded to a survey we conducted in 2015–2016 and qualitative data from interviews of 75 directors. Our study establishes a strong relation between director perceptions of board performance effectiveness and internal board operations. Further, by highlighting the critical role of internal operations, identifying areas of relative strength and weakness in boards’ effectiveness in various activities, and probing director perceptions of their primary responsibilities, we are able to offer concrete suggestions for future research on board effectiveness. This paper was accepted by Shiva Rajgopal, accounting.

We provide a unifying experimental framework in which to study randomization behavior in games and individual choice questions. In each decision, subjects face twenty simultaneous repetitions of the same choice, whereby randomizing constitutes making different choices across the twenty repetitions. We find very high rates of randomization, even in questions that offer a first-order stochastically dominant option. Randomization is highly correlated across domains, while more individuals randomize in games than in analogous decision problems. Experimental treatments test theories of randomization behavior, ruling out most theoretically-based explanations. Results suggest that dominated randomization stems, in part, from a failure of contingent reasoning.

We design a laboratory experiment to identify whether a preference for randomization defines a stable type across different choice environments. In games and individual decisions, subjects face twenty simultaneous repetitions of the same choice. Subjects can randomize by making different choices across the repetitions. We find that randomization does define a type that's predictable across domains. A sizable fraction of individuals randomize in all domains, even in questions that offer a stochastically-dominant option. For some mixers, dominated randomization is responsive to intervention. We explore theoretical foundations for mixing, and find that most preference-based models are unable to accommodate our results.

In March 2016, Bahrain Development Bank’s existing board term came to an end and Khalid Al Rumaihi was appointed the new chairman. Determining a need for change, he immediately overhauled the board and replaced the Bank’s long-standing CEO. The new board quickly concluded that the Bank needed to refocus on its core business of lending to small and medium-sized enterprises (SMEs) and selected an experienced Bahraini corporate banker to implement this strategy. However, within six months, the new CEO resigned and the board had to once again look for a replacement. Expanding their search globally, they found Sanjeev Paul, a Singaporean with immense experience in SME lending, who was appointed CEO of BDB in May 2018. Over the next 20 months, with the board’s support, Paul headed an organization-wide revamp aimed at enabling the bank to refocus and achieve its mandate of …

Concerns about high rates of government corruption in resource rich countries have led transparency advocates to urge oil and gas firms to disclose payments to host governments for natural resources. Transparency, they argue, can increase government accountability and mitigate corruption. However, we find a low frequency of voluntary disclosures of payments by oil and gas firms, and negative stock price reactions for affected firms at the announcement of regulations mandating disclosure. This suggests that sample firm managers and their investors perceive that such disclosures generate private costs, despite any public benefits. We document that industry self-regulation has generated information to substitute for the gap in voluntary company disclosure and that such disclosures are accompanied by lower country corruption ratings. This suggests that collective action could be an effective way for companies to manage the private costs of disclosure and respond to public pressure for transparency that could provide public benefits.

Recently, white-collar crimes have destroyed huge amounts of shareholder value at companies. When a serious offense is uncovered, a firm can be fined billions, and the damage to sales, stock price, and worker engagement can be even more costly. Ineffective regulations and compliance aren't to blame for misconduct, however. Weak leadership and flawed corporate cultures are. If executives want to fix the problem, they need to take ownership of it starting by broadcasting the message that crime hurts everyone. What else should they do? Punish violators consistently, recruit managers with integrity, limit opportunities for unethical decision making, and champion transparency throughout their industries.

In March 2016, Bahrain Development Bank's (BDB) existing board term came to an end and Khalid Al Rumaihi was appointed the new chairman. Determining a need for change, he immediately overhauled the board and replaced BDB's long-standing CEO. The new board quickly concluded that BDB needed to refocus on its core business of lending to small and medium-sized enterprises (SMEs) and selected an experienced Bahraini corporate banker to implement this strategy. However, within six months, the new CEO resigned and the board had to once again look for a replacement. Expanding their search globally, they found Sanjeev Paul, a Singaporean with immense experience in SME lending, who was appointed CEO of BDB in May 2018. Over the next 20 months, with the board's support, Paul headed an organization-wide revamp aimed at enabling the bank to refocus and achieve its mandate of supporting SMEs. By December …

A planner wants to extract information about an agent’s preference relation, but not necessarily the entire relation. Formally, a partition of the set of all possible orderings of alternatives (a ‘type space’) is given, and the planner wants to know to which partition element (‘type’) the agent’s true preference belongs. We say that a type space is elicitable if there exists a mechanism mapping types to (possibly random) outcomes in which the agent strictly prefers truth-telling over lying. In the Savage framework a type space is elicitable if and only if it can be elicited by offering the agent a list of menus and paying one randomly-chosen choice. When the planner can use objective lotteries, more type spaces can be elicited.

Unlike other auction-based carbon emission markets, California's carbon market (AB32) utilizes a consignment auction design in which utilities are allocated a share of emissions permits that they must sell into the uniform-price auction. Auction revenue is returned to the consignee, which creates an incentive to increase the auction clearing price through strategic bidding. In a numerical example, we identify the incentive that consignees have to overstate their quantity demanded in the auction, since this increases the probability that the auction clears at a higher price. This results in inefficient allocations and inflated auction prices. We test this effect through a series of laboratory experiments and confirm these predictions. Findings indicate that short-run firm profits are lower in a consignment auction than in a non-consignment auction market, and that firms are more likely to not receive the quantity of permits they need for program compliance in the auction. We conclude with implications for the design and modification of future Coasian markets.

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We surveyed 2,390 directors of global companies about their boards’ size and composition, internal dynamics, internal governance, and effectiveness. Most directors rated their board size as “just right” despite wide variation in board size, consistent with optimal board size being endogenous. New board members were typically identified through social networks of executives and board members, rather than through executive search firms, partially explaining the low frequency of women and minorities seated on typical boards. In terms of internal governance, 70% of the sample used regular selfassessments. Their use was markedly higher for boards of public companies in common and civil law countries (84% and 75% respectively) than for boards of private companies in common and civil law countries (47% and 42% respectively). Although responding directors typically rated their board’s effectiveness highly, the weakest ratings were for the board’s role in evaluating the CEO and in succession planning, suggesting that these activities are either more difficult or less focal. Finally, ratings of board effectiveness in various functions are related to measures of board composition, internal dynamics, and internal governance.

Kamil Yazici and Izzet Ozilhan founded and built Anadolu Group Holding—a family business that grew into a multi-billion-dollar regional powerhouse. For 57 years they were equal partners in running the company. They then handed over a leadership role to a next generation family member, Izzet’s son Tuncay, who became the CEO and later also chairman. Under Tuncay’s leadership, the company was primarily run by professional managers, supplemented by a limited number of second-and third-generation family members in senior executive positions. However, in 2017, when the number of next-generation family members reached 85, Kamil and Tuncay began work on a governance structure they hoped would sustain the company when they left. Under their plan, family members would no longer be allowed to hold general management positions. As a result, Tuncay retired as CEO and other family members …

Experimental economists currently lack a convention for how to pay subjects in experiments with multiple tasks. We provide a theoretical framework for analyzing this question. Assuming statewise monotonicity and nothing else, we prove that paying for one randomly chosen problem-the random problem selection mechanism-is essentially the only incentive compatible mechanism. Paying for every period is similarly justified when we assume only a "no complementarities at the top" condition. To help experimenters decide which is appropriate for their particular experiment, we discuss empirical tests of these two assumptions.