White Collar Incentives

51 Pages Posted: 17 Sep 2012 Last revised: 3 Oct 2012

See all articles by Kyonghee Kim

Kyonghee Kim

Michigan State University

Bok Baik

Seoul National University

John Evans

University of Pittsburgh - Katz Graduate School of Business

Yoshio Yanadori

University of South Australia

Date Written: September 1, 2012

Abstract

Using novel compensation data on white collar employees (WCE) in large, public U.S. firms, we examine their explicit financial incentives and implicit incentives arising from promotions and labor market opportunities. We find that employees with stronger (weaker) implicit incentives receive more (less) retention incentives measured by long-term equity-based incentives. We also find a dynamic relation between the use of long-term equity-based incentives and employee tenure: long-term equity-based incentives are used intensively in the early years of WCE’s tenure to help attract and retain them in the firm. As employees’ firm-specific human capital increases over time limiting their mobility in the external labor market, the use of long-term equity-based incentives becomes less intensive. Finally, we find that WCE incentives reflect lower horizontal pay disparity in functions where productivity depends significantly on intra-team coordination and information sharing, such as R&D. The overall findings suggest that firms fine-tune explicit incentives to account for differences in implicit incentives arising from job and individual employee characteristics.

Keywords: White collar employee, Implicit incentives, Promotion, Career concerns, Firm-specific human capital, Pay disparity

JEL Classification: M41, M51, M52, M55

Suggested Citation

Kim, Kyonghee and Baik, Bok and Evans, John Harry and Yanadori, Yoshio, White Collar Incentives (September 1, 2012). Available at SSRN: https://ssrn.com/abstract=2147561 or http://dx.doi.org/10.2139/ssrn.2147561

Kyonghee Kim (Contact Author)

Michigan State University ( email )

N206 North Business Complex
632 Bogue Street
East Lansing, MI 48824
United States
517-432-2920 (Phone)

Bok Baik

Seoul National University ( email )

Seoul
Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

John Harry Evans

University of Pittsburgh - Katz Graduate School of Business ( email )

230 Mervis Hall
Pittsburgh, PA 15260
United States

Yoshio Yanadori

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
131
Abstract Views
1,297
rank
245,938
PlumX Metrics