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Donald O Parsons - One of the best experts on this subject based on the ideXlab platform.
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voluntary employer provided Severance pay
Social Science Research Network, 2017Co-Authors: Donald O ParsonsAbstract:Employer-provided Severance pay in the U.S. emerged among salaried workers during the Great Depression as an alternative to modest advance notice and expanded in the late 1950s and 1960s, especially among union (hourly) workers. A variety of sources are employed to estimate variations in Severance coverage and design over the remainder of the 20th Century. The Bureau of Labor Statistics provided coverage estimates from 1980 to 2000, but these offered little information on Severance plan structures, forcing reliance on surveys by private, for-profit management consulting firms.Although the studies differ in sample and survey instrument design, they broadly reveal a standard benefit form –essentially scheduled wage insurance, similar to Severance plans mandated internationally. Coverage is another matter, with voluntary coverage narrowly focused on firms/workers vulnerable to large job displacement wage losses, while mandated coverage is quite broad. Labor market events of the new century highlight the limits of standard benefit schedules as wage insurance, whether voluntary or mandated.
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employer provided Severance pay the emergence of job displacement insurance 1930 1954
Social Science Research Network, 2017Co-Authors: Donald O ParsonsAbstract:Employer-provided Severance pay plans became common during the Great Depression, a reaction to (i) large-scale layoffs of long-service workers, and (ii) the growing formalism of the employment relationship. Reasonably consistent series are constructed for Severance plan coverage and structure by broad occupational group (office or factory workers) over the next two decades based on an ambitious series of surveys conducted by the National Industrial Conference Board. By 1953/54, approximately one-third of surveyed companies reported having a formal Severance plan for nonexempt salary workers and one-sixth for hourly workers.Over much of the period, modal long-service plans offered benefits of a week's pay for each year of service, although many firms, especially those outside the manufacturing sector, offered flat-rate "notice" payments of only a week or two. Surprisingly, coverage levels were only modest higher in 1954 than in the late 1930s. The stability of plan coverage and design in the face of large changes in economic conditions and labor relations remains a puzzle.
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understanding Severance pay
Research Papers in Economics, 2013Co-Authors: Donald O ParsonsAbstract:Severance pay, a fixed-sum payment to workers at job separation, has been the focus of intense policy concern for the last several decades, but much of this concern is unearned. The design of the ideal separation package is outlined and Severance pay emerges as a natural component of job displacement insurance packages, serving both as scheduled reemployment wage insurance and, if search moral hazard is a problem, as scheduled UI. Like any firm-financed separation expenditure, Severance pay can induce excessive job retention, but such distortions do not appear to be of practical significance at benefit levels typically mandated in the industrialized world. Moreover there is no evidence that firms attempt to avoid these firing cost distortions by substituting Severance savings plans, which have zero firing costs. Indeed Severance insurance plans similar to those mandated are often offered voluntarily in the U.S. The appropriate role of government in the market for Severance pay is briefly considered.
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abstract understanding Severance pay
Social Science Research Network, 2013Co-Authors: Donald O ParsonsAbstract:Severance pay, a fixed-sum payment to workers at job separation, has been the focus of intense policy concern for the last several decades, but much of this concern is unearned. The design of the ideal separation package is outlined and Severance pay emerges as a natural component of job displacement insurance packages, serving both as scheduled reemployment wage insurance and, if search moral hazard is a problem, as scheduled UI. Like any firm-financed separation expenditure, Severance pay can induce excessive job retention, but such distortions do not appear to be of practical significance at benefit levels typically mandated in the industrialized world. Moreover there is no evidence that firms attempt to avoid these firing cost distortions by substituting Severance savings plans, which have zero firing costs. Indeed Severance insurance plans similar to those mandated are often offered voluntarily in the U.S. The appropriate role of government in the market for Severance pay is briefly considered.
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Severance pay mandates firing costs hiring costs and firm avoidance behaviors
Research Papers in Economics, 2011Co-Authors: Donald O ParsonsAbstract:The potentially adverse labor market effects of Severance pay mandates are a continuing source of policy concern. In a seminal study, Lazear (1990) found that contract avoidance of Severance pay firing costs was theoretically simple – a bonding scheme would do – but that empirically the labor market distortions were large. Subsequent empirical work resolved the apparent paradox – firing cost effects are modest even without firm avoidance activities. To explore why that should be so, formal measures of Severance-induced firing costs and hiring costs are derived. Firing costs are, it turns out, systematically less than benefit generosity alone would imply. Moreover their interrelationship with hiring costs, often employed in empirical studies as a substitute measure, is complex, with co-movements varying in sign and magnitude across policy parameters and the economic environment. Although the analysis assumes a fixed benefit mandate, the cost measures are easily extended to assess the impact of service-linked Severance benefits on age-specific employment levels. The model permits design of a cohort-neutral Severance mandate – which is not a flat rate structure.
John L Campbell - One of the best experts on this subject based on the ideXlab platform.
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ceo Severance pay and corporate tax planning
Journal of The American Taxation Association, 2020Co-Authors: John L Campbell, Jenny Xinjiao Guan, Zhen ZhengAbstract:We examine the association between CEO Severance pay (i.e., payment a CEO would receive if s/he is involuntarily terminated) and corporate tax planning activities. We find that CEO Severance pay is...
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ceo Severance pay and corporate tax planning
Journal of The American Taxation Association, 2019Co-Authors: John L Campbell, Jenny Xinjiao Guan, Oliver Zhen Li, Zhen ZhengAbstract:We examine the association between CEO Severance pay (i.e., payment the CEO would receive if s/he is involuntarily terminated) and corporate tax avoidance. We find that corporate tax avoidance is increasing in the amount of CEO Severance pay. This finding is consistent with the notion that CEO Severance pay encourages otherwise risk averse managers to take reasonable amounts of risk and, thus, fits into the optimal executive incentive scheme as a form of efficient contracting. Further analysis reveals that the association between CEO Severance pay and corporate tax avoidance is stronger in situations where we expect the risk-taking incentives provided by Severance pay to matter more – when the CEO is otherwise more risk averse and when firms exhibit a higher business risk. Overall, our findings suggest that firms can contract with their managers using CEO Severance pay to provide incentives for them to engage in tax avoidance activities.
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are ex ante ceo Severance pay contracts consistent with efficient contracting
Journal of Financial and Quantitative Analysis, 2016Co-Authors: Brian D Cadman, John L Campbell, Sandy KlasaAbstract:Efficient contracting predicts that ex ante Severance pay contracts are offered to chief executive officers (CEOs) as protection against downside risk and to encourage investment in risky projects with a positive net present value (NPV). Consistent with this prediction, we find that ex ante contracted Severance pay is positively associated with proxies for a CEO’s risk of dismissal and costs the CEO would incur from dismissal. Additionally, we show that the contracted Severance payment amount is positively associated with CEO risk taking and the extent to which a CEO invests in projects that have a positive NPV. Overall, our findings imply that ex ante Severance pay contracts are consistent with efficient contracting.
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are ex ante ceo Severance pay contracts consistent with efficient contracting
Social Science Research Network, 2011Co-Authors: Brian D Cadman, John L Campbell, Sandy KlasaAbstract:Efficient contracting predicts that ex-ante Severance pay contracts are offered to CEOs as protection against downside risk and to encourage investment in risky positive net-present-value projects. Consistent with this prediction, we find that ex-ante contracted Severance pay is positively associated with proxies for a CEO’s risk of dismissal and costs the CEO would incur from dismissal. Additionally, we show that the contracted Severance payment amount positively impacts CEO risk-taking and the extent to which a CEO invests in projects that have a positive net-present-value. Overall, our findings imply that ex-ante Severance pay contracts are consistent with efficient contracting.
Zhen Zheng - One of the best experts on this subject based on the ideXlab platform.
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ceo Severance pay and corporate tax planning
Journal of The American Taxation Association, 2020Co-Authors: John L Campbell, Jenny Xinjiao Guan, Zhen ZhengAbstract:We examine the association between CEO Severance pay (i.e., payment a CEO would receive if s/he is involuntarily terminated) and corporate tax planning activities. We find that CEO Severance pay is...
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ceo Severance pay and corporate tax planning
Journal of The American Taxation Association, 2019Co-Authors: John L Campbell, Jenny Xinjiao Guan, Oliver Zhen Li, Zhen ZhengAbstract:We examine the association between CEO Severance pay (i.e., payment the CEO would receive if s/he is involuntarily terminated) and corporate tax avoidance. We find that corporate tax avoidance is increasing in the amount of CEO Severance pay. This finding is consistent with the notion that CEO Severance pay encourages otherwise risk averse managers to take reasonable amounts of risk and, thus, fits into the optimal executive incentive scheme as a form of efficient contracting. Further analysis reveals that the association between CEO Severance pay and corporate tax avoidance is stronger in situations where we expect the risk-taking incentives provided by Severance pay to matter more – when the CEO is otherwise more risk averse and when firms exhibit a higher business risk. Overall, our findings suggest that firms can contract with their managers using CEO Severance pay to provide incentives for them to engage in tax avoidance activities.
Eitan Goldman - One of the best experts on this subject based on the ideXlab platform.
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contractual versus actual Severance pay following ceo turnover
Social Science Research Network, 2011Co-Authors: Peggy Huang, Eitan GoldmanAbstract:Using hand-collected data, we document the details of the ex-ante Severance contracts and the ex-post separation pay given to S&P500 CEOs upon departing from their companies. We analyze what determines whether or not a departing CEO receives separation pay in excess of her Severance contract. We find that discretionary separation pay is, on average, $8 million, which amounts to close to 242% of a CEO’s annual compensation. We investigate several potential explanations for this phenomenon and find evidence that in voluntary CEO departures, discretionary separation pay represents a governance problem. In contrast, we find evidence that in forced departures, discretionary separation pay is used to facilitate an amicable and smooth transition from the failed ex-CEO to a new CEO. These results help to shed light on the dual role played by Severance compensation and on the bargaining game played between the board and the departing executive.
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contractual versus actual Severance pay following ceo departure
Social Science Research Network, 2010Co-Authors: Peggy Huang, Eitan GoldmanAbstract:Using hand-collected data, we document the details of the ex-ante Severance contract and the ex-post separation pay given to S&P500 CEOs upon departing from their company. We analyze what are the determinants of whether or not a departing CEO receives separation pay in excess of her Severance contract. This excess separation pay is on average, $8 million, which amounts to close to 242% of a CEOs’ annual compensation. We investigate several potential explanations for this phenomenon and find evidence that in voluntary CEO departures, excess separation pay represents a governance problem. In contrast, we find evidence that in forced departures, excess separation pay represents a need to facilitate a quick and smooth transition from the failed ex-CEO to a new CEO. These results help to shed light on the dual role played by Severance compensation and on the bargaining game played between the board and the departing executive.
Sandy Klasa - One of the best experts on this subject based on the ideXlab platform.
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are ex ante ceo Severance pay contracts consistent with efficient contracting
Journal of Financial and Quantitative Analysis, 2016Co-Authors: Brian D Cadman, John L Campbell, Sandy KlasaAbstract:Efficient contracting predicts that ex ante Severance pay contracts are offered to chief executive officers (CEOs) as protection against downside risk and to encourage investment in risky projects with a positive net present value (NPV). Consistent with this prediction, we find that ex ante contracted Severance pay is positively associated with proxies for a CEO’s risk of dismissal and costs the CEO would incur from dismissal. Additionally, we show that the contracted Severance payment amount is positively associated with CEO risk taking and the extent to which a CEO invests in projects that have a positive NPV. Overall, our findings imply that ex ante Severance pay contracts are consistent with efficient contracting.
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are ex ante ceo Severance pay contracts consistent with efficient contracting
Social Science Research Network, 2011Co-Authors: Brian D Cadman, John L Campbell, Sandy KlasaAbstract:Efficient contracting predicts that ex-ante Severance pay contracts are offered to CEOs as protection against downside risk and to encourage investment in risky positive net-present-value projects. Consistent with this prediction, we find that ex-ante contracted Severance pay is positively associated with proxies for a CEO’s risk of dismissal and costs the CEO would incur from dismissal. Additionally, we show that the contracted Severance payment amount positively impacts CEO risk-taking and the extent to which a CEO invests in projects that have a positive net-present-value. Overall, our findings imply that ex-ante Severance pay contracts are consistent with efficient contracting.
