ILR School

Institute for Compensation Studies

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The Institute for Compensation StudiesTM (ICS) in the ILR School at Cornell University is a vehicle for interdisciplinary research on compensation, compensation design and compensation strategy.

All aspects of compensation are explored by the Institute including (but not limited to) compensation design, compensation in for-profit and nonprofit organizations, executive compensation, benefits and pensions, total compensation, forms of pay and pay “mix”, the relationship between pay and “performance”, compensation in labor unions, public policy, regulation and legal issues, minimum wages and compensation internationally.

The Institute also strives to be the central repository for academic research on compensation worldwide. Interested researchers can submit their papers to the ICS for possible inclusion by sending a message to:


Recent Submissions

Now showing 1 - 10 of 36
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    The Use of Human Capital Metrics in Executive Compensation
    Institute for Compensation Studies (Cornell University, ILR School, Institute for Compensation Studies, 2024)

    Our inaugural symposium topic is the use of human capital metrics in executive compensation. A working group of representatives from academia, consulting, and publicly traded U.S. companies, convened in November 2023 to tackle three interrelated questions:

    Is there evidence that human capital investments provide a positive return to corporations?

    How is the impact of those investments most effectively measured?

    Should such metrics be factored in the executive performance and incentive determination processes? If so, how?

    This report presents findings on human capital metrics of different types and their prevalence in public disclosures as well as trends in the use of human capital metrics in executive compensation. We outline recommendations and guidance for developing and monitoring human capital metrics. We provide a framework for deciding whether these metrics should be embedded in executive incentive plans. We offer a new approach to incentive design that is grounded in behavioral economics theory and research with the caveat that our recommendations were not unanimously endorsed by the working group and it was agreed that they are not universally applicable.

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    Theory and Evidence in Internal Labor Markets (CRI 2009-013)
    Waldman, Michael (2008-05-01)
    A number of branches of the literature on internal labor markets have matured to the point that there is now a healthy two-way interaction between theory and empirical work. In this survey I consider two of these branches: i) wage and promotion dynamics; and ii) human-resource practices. For each case I describe the empirical and theoretical literatures and also discuss what we can learn by paying careful attention to how theoretical and empirical findings are related. In addition to surveying the literatures on these two topics, my goal is to show how a deeper understanding of internal-labor-market phenomena can be derived from a close partnering of empirical and theoretical research.
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    CEO Turnover and Firm Performance in China’s Listed Firms (CRI 2009-012)
    Conyon, Martin; He, Lerong (2008-11-05)
    Manuscript Type: Empirical Research Question/Issue: This study investigates the relation between CEO turnover and firm performance in China’s listed firms. The study examines how the sensitivity of CEO turnover to firm performance is moderated by the private control of firms, the presence of a majority shareholder and the presence of independent directors on the board. Research Findings/Insights: Using a panel of about 1200 Chinese firms per year from 1999 to 2006 we find significant changes in the ownership and control of firms. The private control of firms and the fraction of independent directors on the board have increased considerably over time. The study finds a significant negative association between CEO turnover and firm performance consistent with the agency model. There is evidence that the CEO turnover sensitivity for poor performance is greater in firms that are privately controlled, or have a majority shareholder, or have a greater fraction of independent directors on the board. Theoretical/Academic Implications: This study provides empirical support for the agency model and the importance of internal corporate governance to attenuate agency costs. It provides important insights into firm governance in transition economies. Practitioner/Policy Implications: This study offers insights to policy makers interested in enhancing the design of internal corporate governance within transition economies.
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    Performance Pay and the White-Black Wage Gap
    Heywood, John S.; Parent, Daniel (2009-08-01)
    We show that the reported tendency for performance pay to be associated with greater wage inequality at the top of the earnings distribution applies only to white workers. This results in the white-black wage differential among those in performance pay jobs growing over the earnings distribution even as the same differential shrinks over the distribution for those not in performance pay jobs. We show this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks. We explore reasons behind our finding that performance pay is associated with greater racial earnings gaps at the top of the wage distribution focusing on the interactions between discrimination, unmeasured ability and selection.
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    Executive Compensation and CEO Equity Incentives in China’s Listed Firms (CRI 2009-006)
    Conyon, Martin J.; He, Lerong (2008-08-31)
    This study investigates the economic, ownership and governance determinants of executive compensation and CEO equity incentives in China’s listed firms. Consistent with the agency theory, we find that executive compensation is positively correlated with firm size, performance, and growth opportunities. CEO incentives are negatively associated with firm size, positively linked with firm performance and growth opportunity. Firm risk has a negative effect on pay and incentives. Compensation and CEO incentives are significantly greater in privately-controlled firms compared to state-run firms and are lower in firms with concentrated ownership structures. Boardroom governance is important: firms with compensation committees or a greater fraction of independent directors on the board have higher executive pay and greater CEO equity incentives.
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    Negative Hedging: Performance Sensitive Debt and CEOs’ Equity Incentives (CRI 2009-014)
    Tchistyi, Alexei; Yermack, David; Yun, Hayong (2009-01-01)
    We examine the relation between CEOs’ equity incentives and their use of performance-sensitive debt contracts. These contracts require higher or lower interest payments when the borrower's performance deteriorates or improves, thereby increasing expected costs of financial distress while making a firm riskier to the benefit of option holders. We find that managers whose compensation is more sensitive to stock volatility choose steeper and more convex performance pricing schedules, while those with high delta incentives choose flatter, less convex pricing schedules. Performance pricing contracts therefore seem to provide a channel for managers to increase firms’ financial risk to gain private benefits.
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    CEO Pay-for-Performance Heterogeneity Using Quantile Regression (CRI 2009-002)
    Hallock, Kevin F.; Madalozzo, Regina; Reck, Clayton G. (2008-07-29)
    We provide some examples of how quantile regression can be used to investigate heterogeneity in pay–firm size and pay-performance relationships for U.S. CEOs. For example, do conditionally (predicted) high-wage managers have a stronger relationship between pay and performance than conditionally low-wage managers? Our results using data over a decade show, for some standard specifications, there is considerable heterogeneity in the returns to firm performance across the conditional distribution of wages. Quantile regression adds substantially to our understanding of the pay-performance relationship. This heterogeneity is masked when using more standard empirical techniques.
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    Is a Higher Calling Enough? Incentive Compensation in the Church (CRI 2009-011)
    Hartzell, Jay C.; Parsons, Christopher A.; Yermack, David L. (2009-11-11)
    We study the compensation and productivity of more than 2,000 Methodist ministers in a 43-year panel data set. The church appears to use pay-for-performance incentives for its clergy, as their compensation follows a sharing rule by which pastors receive approximately 3% of the incremental revenue from membership increases. Ministers receive the strongest rewards for attracting new parishioners who switch from other congregations within their denomination. Monetary incentives are weaker in settings where ministers have less control over their measured performance.
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    Executive Compensation in American Unions (CRI 2009-007)
    Hallock, Kevin F.; Klein, Felice B. (2009-09-08)
    Studying compensation in the nonprofit sector is difficult. In nonprofit organizations, it is not always clear what the objectives of the organization are and, therefore, perhaps even more difficult to consider how to compensate managers than in the for-profit sector. This paper investigates the determinants of executive compensation of leaders of American labor unions. We use panel data on more than 75,000 organization-years of unions from 2000 to 2007. We specifically concentrate on two issues of importance to unions – the level of membership and the wages of union members. Both measures are strongly related to the compensation of the leaders of American labor unions, even after controlling for organization size and individual organization fixed-effects. Additionally, the elasticity of pay with respect to membership for unions is very similar to the elasticity of pay with respect to employees in for profit firms over the same period.
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    The Relative Effects of Merit Pay, Bonuses, and Long-Term Incentives on Future Job Performance (CRI 2009-009)
    Park, Sanghee; Sturman, Michael C. (2009-01-01)
    Extant compensation literature has indicated that pay-for-performance can influence employee performance. There is little research, however, that differentiates the effects of certain forms of pay-for-performance plans on future performance. By applying the precepts of expectancy theory to specific components of the pay-for-performance plans and using longitudinal data from a sample of 739 US employees in a service-related organization, this study demonstrates different effects for merit pay, bonuses, and long-term incentives.