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...
Comments by Anni Norring, on The Impact of CEO Long-term Equity-based Compensation Incentives on Economic Growth in Collectivist versus Individualist Countries
Comments by Anni Norring, on The Impact of CEO Long-term Equity-based Compensation Incentives on Economic Growth in Collectivist versus Individualist Countries. Asian Economic Papers 2016; 15 (2): 134–135. doi: https://doi.org/10.1162/ASEP_a_00433
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