Comments by Anni Norring, on The Impact of CEO Long-term Equity-based Compensation Incentives on Economic Growth in Collectivist versus Individualist Countries

Anni Norring: The authors propose two hypotheses to address the relation between prevalence of CEO long-term incentive pay and GDP growth and how the culture of a country perceived as individualist or collectivist affects this relationship. First, they argue that CEO pay incentives increase GDP growth, as even a weak positive link between these and firm performance may lead to positive effect on the GDP growth once the effect is aggregated. This effect could then be further strengthened by a spillover effect: As long-term incentive pay is received by CEOs in some firms, this signals to CEOs in other firms that by imitating this behavior they too might receive performance-based compensation—the authors name this the “vicarious agent effect.” This would lead to a higher share of CEOs having long-term incentives to make the firm grow and thus inducing higher future real GDP growth. The second hypothesis states that this effect...