CEO turnover in a competitive assignment framework

There is considerable and widespread concern about whether CEOs are appropriately punished for poor performance. The empirical literature on CEO turnover documents that CEOs are indeed more likely to be forced out if their performance is poor relative to the industry average. However, CEOs are also more likely to be replaced if the industry is doing badly. We show that these empirical patterns are natural and efficient outcomes of a competitive assignment model in which CEOs and firms form matches based on multiple characteristics, and where industry conditions affect the outside options of both managers and firms. Our model also has several new predictions about the type of replacement manager, and their pay and performance. We construct a dataset which describes all turnover events during the period 1992-2006 and show that these predictions are also born out empirically.Executive Turnover; Matching Models; Competitive Assignment; CEO Labor Market

Rare variants in dynein heavy chain genes in two individuals with situs inversus and developmental dyslexia : a case report

Background Developmental dyslexia (DD) is a neurodevelopmental learning disorder with high heritability. A number of candidate susceptibility genes have been identified, some of which are linked to the function of the cilium, an organelle regulating left-right asymmetry development in the embryo. Furthermore, it has been suggested that disrupted left-right asymmetry of the brain may play a role in neurodevelopmental disorders such as DD. However, it is unknown whether there is a common genetic cause to DD and laterality defects or ciliopathies. Case presentation Here, we studied two individuals with co-occurring situs inversus (SI) and DD using whole genome sequencing to identify genetic variants of importance for DD and SI. Individual 1 had primary ciliary dyskinesia (PCD), a rare, autosomal recessive disorder with oto-sino-pulmonary phenotype and SI. We identified two rare nonsynonymous variants in the dynein axonemal heavy chain 5 gene (DNAH5): a previously reported variant c.7502G > C; p.(R2501P), and a novel variant c.12043 T > G; p.(Y4015D). Both variants are predicted to be damaging. Ultrastructural analysis of the cilia revealed a lack of outer dynein arms and normal inner dynein arms. MRI of the brain revealed no significant abnormalities. Individual 2 had non-syndromic SI and DD. In individual 2, one rare variant (c.9110A > G;p.(H3037R)) in the dynein axonemal heavy chain 11 gene (DNAH11), coding for another component of the outer dynein arm, was identified. Conclusions We identified the likely genetic cause of SI and PCD in one individual, and a possibly significant heterozygosity in the other, both involving dynein genes. Given the present evidence, it is unclear if the identified variants also predispose to DD and further studies into the association between laterality, ciliopathies and DD are needed.Peer reviewe

Keeping the Board in the Dark: CEO Compensation and Entrenchment

We study a model in which a CEO can entrench himself by hiding information from the board that would allow the board to conclude that he should be replaced. Assuming that even diligent monitoring by the board cannot fully overcome the information asymmetry visà- vis the CEO, we ask if there is a role for CEO compensation to mitigate the inefficiency. Our analysis points to a novel argument for high-powered, non-linear CEO compensation such as bonus pay or stock options. By shifting the CEO’s compensation into states where the firm’s value is highest, a high-powered compensation scheme makes it as unattractive as possible for the CEO to entrench himself when he expects that the firm’s future value under his management and strategy is low. This, in turn, minimizes the severance pay needed to induce the CEO not to entrench himself, thereby minimizing the CEO’s informational rents. Amongst other things, our model suggests how deregulation and technological changes in the 1980s and 1990s might have contributed to the rise in CEO pay and turnover over the same period

CEO Turnover in a Competitive Assignment Framework

This paper considers the empirical stylized facts about CEO turnover in the context of a competitive assignment model in which CEOs and firms form matches based on multiple characteristics. CEOs are viewed as hedonic goods with multidimensional skill bundles. Likewise, firms ’ production functions have heterogeneous weights on CEO skills such as firm-specific knowledge, ability to grow sales, and ability to cut costs. There exists a competitive market for CEOs, whose wages are determined analogously to the prices of the hedonic goods in Rosen (1974). The competitive assignment framework with multiple skill dimensions is able to capture several stylized facts which are not explained by existing theories. For example, in our model, both poor relative performance and poor absolute performance are associated with higher rates of CEO turnover. Relative performance evaluation matters even though there is no agency problem or learning, and overall industry performance affects turnover as well. Our model also makes predictions about the type and pay of the replacement manager conditional on turnover type which are consistent with patterns we document empirically. For example, managers who are fired are more likely to be replaced by industry outsiders than are managers who quit or retire. Moreover, replacement managers in these cases earn significantly more than the incumbent. To document pay and replacement type as a function of the type of turnover event, we construct a large dataset describing turnover events during the period 1992-2006, including the type of turnover event, and the characteristics and pay of the replacement manager