Agency Conflicts within Calibration Committees

39 Pages Posted: 30 Apr 2018 Last revised: 30 Jan 2023

See all articles by Jasmijn C. Bol

Jasmijn C. Bol

Tulane University - A.B. Freeman School of Business

Andson Braga de Aguiar

University of São Paulo (USP)

Jeremy B. Lill

University of Kansas

Date Written: January 28, 2023

Abstract

In this study we use an agency perspective to examine the common practice of employee performance rating calibration, the process in which calibration committee members discuss, compare, and potentially adjust direct supervisors’ initial subjective employee performance ratings. In a setting where direct supervisors are included in the calibration process, we find that calibration committees function as information sharing platforms. Our results indicate that this information is incorporated in the performance ratings and reduces information asymmetry, as we find performance information availability positively affects adjustments made by the calibration committee. Our study also indicates that the presence of the direct supervisors creates an agency conflict between the direct supervisor and the rest of the calibration committee, which we predict and find attenuates information sharing. Applying an agency perspective also allows us to predict which supervisors are able to maintain the highest post-calibration ratings. Although there is pressure on the calibration committees collectively to make sufficient downward adjustments, not every supervisor’s employee performance ratings need to be adjusted. We predict and find that those supervisors who have lower costs related to defending their employee ratings in the calibration process, ceteris paribus, receive fewer adjustments and end up with higher ratings.

Keywords: Calibration, Calibration Committee, Agency Theory, Information Asymmetry, Subjective Performance Evaluation

JEL Classification: M41

Suggested Citation

Bol, Jasmijn C. and Braga de Aguiar, Andson and Lill, Jeremy B., Agency Conflicts within Calibration Committees (January 28, 2023). Available at SSRN: https://ssrn.com/abstract=3161692 or http://dx.doi.org/10.2139/ssrn.3161692

Jasmijn C. Bol

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Andson Braga de Aguiar (Contact Author)

University of São Paulo (USP) ( email )

Rua Luciano Gualberto, 315
São Paulo, São Paulo 14800-901
Brazil

Jeremy B. Lill

University of Kansas ( email )

Department of Accounting
School of Business
Lawrence, KS 66045
United States

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