Ethical Corporate Citizenship: Does it Pay?

Ethical corporate citizenship and good corporate governance have received increased attention since the financial scandals prevalent at the beginning of the new millennium. This study first explores the relationship of ethical corporate citizenship to financial performance (i.e., greater profitability and efficiency, and lower cost of capital). Second, the study examines whether ethical corporate behavior is associated with a market-value premium. Results of prior studies are mixed. The results of our study contribute directly to the recent accounting literature in which specific aspects of ethical corporate behavior have been explored (Fukami et al. 1997; Ittner and Larker, 1998; Ballou et al., 2003; Clarkson et al., 2004). We use firms listed by Business Ethics as “The 100 Best Corporate Citizens” as our sample of ethical firms. The univariate results of our study indicate a significant relationship between ethical corporate behavior and financial performance (i.e., greater profitability and efficiency, and lower cost of capital). The results of multivariate tests, controlling for prior year market value of equity, yield results which indicate a marginally significant association between being recognized as ethical in that year and market value of equity, but no association between being recognized as ethical at least one time and market value of equity. Nevertheless, given our study’s findings of better financial performance and lower risk, we conclude that ethical corporate citizenship does indeed benefit a firm

Team Identity and Performance-based Compensation Effects on Performance

This study investigates whether team members work harder and perform better when they are compensated based on both team and individual performance than when compensated based on team or individual performance alone and whether teammates? familiarity with one another influences the effectiveness of the compensation scheme. Four-member ad hoc student teams repeatedly complete an interdependent task on the computer in an experiment in which I manipulate individual compensation plan (flat wage or performance-based incentives), team compensation plan (flat wage or performance-based incentives), and teammate familiarity (identified teammates with pre-experiment interaction ? strong id or unidentified teammates with no pre-experiment interaction ? weak id). Results indicate that while the combination of team and individual performance-based compensation results in the highest performance, the incremental performance boost is higher from the first performance-based reward strategy, regardless of whether it is team or individual. Under both strong and weak identity, offering a combination of individual and team performance-based compensation results in comparable performance, suggesting that lower productivity levels associated with low team identity can be overcome with performance-based compensation. Together these results suggest that, regardless of team identity, firms can benefit from offering both team and individual performance-based compensation. However, companies should understand that the performance bump may be smaller from the second performance-based scheme

Creating An Executive Compensation Plan: A Corporate Tax Planning Case

In this case, the student takes on the role of a compensation committee team member in a publicly-traded corporation. The case task is to create a compensation plan for the company’s CEO using past data regarding CEO compensation and specific incentives from proxy statements, along with financial statement performance data. The case requires the student consider multiple issues, both tax and non-tax. To develop a comprehensive plan for the executive, students must incorporate numerous course topics and apply them to the particular fact pattern. Pre- and post-case responses from students confirm that this case furthers their understanding of the interplay between corporate tax rules and executive compensation while cultivating critical thinking skills. The case has been used in both graduate tax and graduate accounting courses. To accommodate different teaching philosophies and course emphasis (tax or accounting), three variations of the project are provided

Do Ethical Firms Bridge the Gender Gap in CEO Compensation?

Concern about the gender gap in employee compensation is an important social and business issue. Effective corporate social responsibility requires fair treatment of all employees, regardless of gender. Using a sample of firms that have been noted for their ethical behavior, this study examines whether ethical firms compensate female CEOs comparably to male CEOs. Our sample of ethical firms includes companies listed as one of the “100 Best Corporate Citizens” by Corporate Responsibility (formerly Business Ethics) magazine and with data available in Compustat, CRSP, and ExecuComp for fiscal years 1998-2009. We hypothesize that ethical firms, relative to non-list firms, close (or at least narrow) the gender gap in CEO compensation. Our findings indicate that female CEOs of ethical companies are not penalized for their gender (that is, they do not earn less than their male counterparts)

Team identity and performance-based compensation effects on performance

Purpose – The purpose of this paper is to investigate whether team members work harder and perform better when they are compensated based on both team and individual performance than either alone and whether teammates’ familiarity with one another influences the effectiveness of the compensation scheme. Design/methodology/approach – Four-member ad hoc student teams repeatedly complete an interdependent task on the computer in an experiment which manipulates individual compensation plan, team compensation plan, and teammate familiarity. Findings – Results indicate that offering a combination of individual and team performance-based compensation results in comparable performance under both strong and weak team identity, suggesting that the lower productivity levels associated with weak team identity can be overcome with performance-based compensation. Research limitations/implications – The data are collected from an experimental game created to resemble one interdependent production environment, thus reducing the generalizability of the results. An experimental environment was chosen because it allowed testing of only the variables of interest – team compensation, individual compensation, and team identity, while holding other factors (i.e. task and compensation variation) constant. Practical implications – The results suggest that, regardless of team identity, firms can benefit from offering both team and individual performance-based compensation. Originality/value – This study examines individual and team compensation simultaneously, in contrast to studying each in isolation. Additionally, this study investigates whether teammate familiarity moderates the effect of performance-based compensation on performance

Developing student competencies: An integrated approach to a financial statement analysis project

This paper presents an instructional resource for an integrated financial statement analysis project. The project requires a quantitative analysis of a company’s financial statements and a written research report. The project is designed to develop students’ critical thinking and analytical capabilities through the application of course concepts to a real company, while also providing opportunities to develop professional competencies. Following Anson’s instructional design model (2007), the integrated project includes supporting activities, which are designed to aide students in achieving the project’s learning goals. The supporting activities include in-class instruction on financial ratios, a computer lab session on Excel, draft papers, peer reviews of writing and paper revisions. The integrated project also serves as an example of an assignment that is consistent with two recent education frameworks, the Integrated Competency-Based Framework (Lawson et al., 2014) and the AICPA Core Competency Framework (2015), which both advocate for increased integration of professional competencies within the accounting curriculum. Our instructional resource provides project instructions, supporting activities, as well as implementation guidance and a grading rubric. The paper discusses adaptations to tailor the project to various courses and audiences. The resources in this article are useful for instructors implementing a financial statement analysis project into accounting, finance, financial statement analysis and investment courses targeted at either the undergraduate or graduate levels