Relative Performance Evaluation, Sabotage and Collusion

69 Pages Posted: 31 Mar 2020 Last revised: 25 Apr 2021

See all articles by Matthew J. Bloomfield

Matthew J. Bloomfield

The Wharton School of the University of Pennsylvania

Catarina M. P. Marvão

Technological University Dublin; Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE)

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Multiple version iconThere are 2 versions of this paper

Date Written: January 23, 2020

Abstract

We examine whether the potential for costly sabotage is a deterrent to firms' use of relative performance evaluation ("RPE") in CEO pay plans. We exploit illegal cartel membership as a source of variation in the potential for costly sabotage and document that firms are more likely
to use RPE if they are currently cartel members. Moreover, firms frequently drop RPE from their CEOs' pay plans immediately after their cartels are detected, convicted and punished. We further provide suggestive evidence that the potential for costly sabotage explains these patterns; cartel membership severs the empirical association between RPE and competitive aggression.

Keywords: Compensation, Collusion, Cartels, Managerial Incentives, Relative Performance Evaluation, Sabotage

JEL Classification: D21, D22, D43, G30, G35

Suggested Citation

Bloomfield, Matthew J. and Marvão, Catarina Moura Pinto and Spagnolo, Giancarlo, Relative Performance Evaluation, Sabotage and Collusion (January 23, 2020). Available at SSRN: https://ssrn.com/abstract=3524522 or http://dx.doi.org/10.2139/ssrn.3524522

Matthew J. Bloomfield

The Wharton School of the University of Pennsylvania ( email )

1325 Steinberg-Dietrich Hall
3620 Locust Walk
Philadelphia, PA PA 19103-1724
United States
6073513042 (Phone)
6073513042 (Fax)

Catarina Moura Pinto Marvão (Contact Author)

Technological University Dublin ( email )

Dublin
Ireland

Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE) ( email )

P.O. Box 6501
S-113 83 Stockholm, 11383
Sweden

Giancarlo Spagnolo

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
113
Abstract Views
564
rank
298,060
PlumX Metrics