In Search of Informed Discretion (Revisited): Are Managers Concerned about Appearing Selfish?

40 Pages Posted: 12 Jan 2021

See all articles by Bart Dierynck

Bart Dierynck

Tilburg University

Jesse van der Geest

Tilburg University

Victor van Pelt

WHU - Otto Beisheim School of Management

Date Written: November 24, 2020

Abstract

To improve the quality of performance evaluation and compensation decisions, managers can undertake costly searches for additional information about employees' contributions to performance. Prior accounting research suggests that managers are generally willing to undertake these costly information searches because they have a preference for fairness. However, our experimental results show that managers are significantly less willing to undertake costly information searches when the situation allows them to avoid negative inferences when acting selfishly. Our findings are consistent with predictions rooted in behavioral economics and psychology that even self-interested people behave fairly in some situations because they have concerns about appearing selfish, either to themselves or others. We conclude that increasing managers' concerns about appearing selfish may prompt them to make fairer and thus more informed performance evaluation and compensation decisions.

Keywords: managerial discretion; discretionary bonus pool; incentive contracting; reciprocity; fairness; trust; third-party intervention

JEL Classification: C92, D91, M40, M41

Suggested Citation

Dierynck, Bart and van der Geest, Jesse and van Pelt, Victor, In Search of Informed Discretion (Revisited): Are Managers Concerned about Appearing Selfish? (November 24, 2020). Available at SSRN: https://ssrn.com/abstract=3736930

Bart Dierynck (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Jesse Van der Geest

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Victor Van Pelt

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
13
Abstract Views
81
PlumX Metrics