Robert M. Wiseman

Michigan State University | MSU · Department of Management

Combining insights from the socioemotional wealth and institutional perspectives, we hypothesize that firms controlled by families offer greater job security to employees relative to non-family firms, and this positive employment effect is amplified in riskier institutional environments around the world. Using an unbalanced panel of 3,181 listed fi...

The COVID 19 crisis and geopolitical ruptures of recent years have highlighted the importance of operations and supply chain management (OSCM) to firms and society. How do OSCM executives make decisions under uncertainty, and how do they balance the competing needs of various stakeholders? The behavioral agency model (BAM), which has been widely us...

We draw on the behavioral agency model to explore the ethical consequences of CEO equity incentives. We argue that CEOs are more concerned with funding pension plans when they have more to gain from their stock options yet will increasingly underfund employee pension funds as their current option wealth increases. Our findings reveal that both effe...

Infusing stakeholder agency theory with insights from behavioural agency theory, we describe a frame‐dependent relationship between CEO stock option incentives and tax avoidance. Our theoretical framework highlights the role of competing shareholder demands in providing a salient reference point for a CEO contemplating the implications of tax avoid...

Purpose The purpose of this commentary is to enrich the finding by Aguinis et al. (in press) that there is little overlap between the extremes of firm performance and the extremes of CEO pay using a novel approach to characterize the distribution of pay and performance. We aim to shift the focus of compensation researchers from fruitlessly trying...

The effectiveness of monitoring and incentive alignment as mechanisms for controlling agency costs have been explored separately and in combination, with monitoring substituting for weaknesses in incentive alignment and vice versa; this equates to positive substitution when describing how monitoring and incentive alignment interact to influence sha...

Allocating internal financial capital represents a key task for managers of multidivisional corporations. This has led to a wealth of research and theorizing about capital allocation and whether or not managers allocate capital successfully. However, capital allocation research has diverged in a number of directions that reflect different and often...

The effectiveness of monitoring and incentive alignment as mechanisms for controlling agency costs have been explored separately and in combination, with monitoring substituting for weaknesses in incentive alignment and vice versa; this equates to positive substitution when describing how monitoring and incentive alignment interact to influence sha...

We draw on behavioral agency theory to explain how decision heuristics associated with CEO stock options interact with firm slack to shape the CEO’s preference for short or long-term strategies (temporal orientation). Our findings suggest CEO current option wealth substitutes for the influence of slack resources in encouraging a long-term orientati...

A large volume of research has examined agent risk taking and the contracting problem of risk sharing - the sharing of performance risk across agent and principal - to advance our knowledge of mechanisms that can align the assumed divergent interests and risk preferences of the managerial agent and shareholder principal. This research has been unde...

A large volume of research has examined agent risk taking and the contracting problem of risk sharing - the sharing of performance risk across agent and principal - to advance our knowledge of mechanisms that can align the assumed divergent interests and risk preferences of the managerial-agent and shareholder-principal. This research has been unde...

In this study we introduce a justice perspective to examining the result of bargaining between CEOs and boards over the allocation of firm residuals that ultimately determines CEO compensation. Framing CEO pay as the result of bargaining between CEOs and boards focuses attention on the power of CEOs to increase their share of firm residuals in the...

Research on the role of the corporate office in firm performance has focused on establishing how much performance variance can be attributed to a “corporate effect”, with little attention devoted to understanding how this influence occurs. In this study, we model capital allocation competency as a dynamic managerial capability and find that lower l...

We hypothesize and find strong empirical support for the notion that in exchange for higher risk bearing CEOs realize greater returns than shareholders across all market cycles. That is, CEOs hedge the risk of equity-based contingent pay by structuring the awards of this pay, thus insulating CEO equity-based pay from negative stock price fluctuatio...

We extend the behavioral agency model (BAM) to the study of temporal orientation and agent short-termism. Short-termism is a particular type of temporal orientation that has long been scorned for its cost to long term value creation; a view underlined by the belief that it was a significant contributor to the severity of the Great Recession. Yet li...

Conceiving of stock options as providing CEOs with cues for the possibility of both greater prospective wealth and losses to current wealth, we revisit predictions of the behavioral effects of equity-based pay using the behavioral agency model (BAM). We refine the BAM's original formulation and provide an explanation for previous conflicting empiri...

Manuscript Type Conceptual Research Question/Issue In this paper we discuss three assumptions of agency theory: (1) conflicts of interest between principal and agent, (2) nature of risk, and (3) the proposed internal mechanisms to reduce agency costs. We review criticisms of agency theory's pessimistic assumptions of human behavior and its simplis...

CEO option compensation can lead to both more and less risk taking, depending upon the current value (leading to less risk) or prospects for option wealth gains if risk is successful (leading to more risk). Thus, it is important that boards of directors match the incentives created by the CEO's compensation contract and option wealth with their int...

This study examines the influence of backward-looking, reference-dependent decisions on forward-looking capital allocation investment choices across business units within a firm. Specifically, we develop an integrated behavioral framework for predicting how aspirations for business unit performance affect the efficiency of the internal capital allo...

We challenge critics of agency theory who suggest that agency theory's value does not extend outside a narrow context dominated by egocentric agents seeking only to maximize wealth at the expense of the principal. Instead, we argue that agency theory's flexibility allows for its application to a variety of non‐traditional settings where the key ele...

Purpose – This paper seeks to analyze how compensation framing influences the risk-taking behavior of the firm's chief executive officer (CEO), and the mediating role played by risk bearing. Design/methodology/approach – The study employs a sample of 108 US firms that issued an initial public offering in 1993, 1994 and 1995. Data from a survey fill...

There is currently a debate in the literature regarding whether family firm ownership fosters or discourages risk-taking activities. In this article, we propose a contingency framework that shifts the focus of investigation: instead of asking whether family firms tend to be risk takers, we suggest specific ownership conditions under which privately...

Management and especially strategy research rely heavily on the use of ratios to measure a variety of firm, industry, and societal characteristics. Most often, these ratios are created simply to control for size effects (i.e., scaling) emanating from differences in the size of firms, industries, populations, or national economies on the variables o...

This chapter reviews the research and debate over the use of ratio measures in social science research and how they can lead to spurious associations. Several alternative approaches to rectifying the problem of ratio measures is offered.

Assuming a positive influence of stock price volatility on stock option value, incentive alignment proponents argue that stock option compensation encourages managerial risk seeking and, thus, aligns managers' and shareholders' risk preferences. Our findings show that stock option holders overvalue unexercisable options relative to options being of...

We examine the influence of CEO equity-based compensation on the strategic risk taking by the firm. Building off of the Behavioral Agency Model, Agency Theory, and Prospect Theory, we develop arguments about when equity-based compensation elements will increase and when they will decrease executive risk propensity and, in turn, strategic risk takin...

Employing survey and archival data from a sample of IPO firms, and extending the ideas of the Behavioral Agency Model, this study examines the influence of various forms of risk bearing created within the compensation contract on perceived risk taking. The results show that employment risk and variability in compensation each corresponds to greater...

One of the key ways in which many scientific fields (including management) develop is through scholarly journal publication (McWilliams, Siegel, & Van Fleet, 2005; Spencer, 2001). The top journals in a field serve as a collection and dissemination system, annually gathering in thousands of submis-sions that are then carefully evaluated and cri-tiqu...

Bruce, Buck and Main (2005) offer two criticisms of agency theory as a valid model of executive behaviour. First, they suggest that because researchers have failed to find a strong empirical link between executive pay and firm performance, and since this research generally rests on models derived from agency theory, then we must question the theory...

Agency theoretic models have been used in the past to justify the use of stock options as an effective incentive alignment mechanism to create a common fate between principals and agents. In this paper, we use behavioral theory to reach the opposite conclusion – namely, that the design characteristics of the typical stock option plan foster pervers...

This paper develops an integrated framework of risk management and strategic competitive advantage that incorporates behavioural and economic notions of risk. The resulting model argues for the importance of risk-taking to sustainable competitive advantage and ultimately to firm performance. The model integrates framing effects of attainment discre...

ABSTRACT We examined the effects of unsystematic and systematic firm risk on CEO compensation risk bearing and total pay. Both the proportion of variable pay in the CEO pay package and the magnitude of the CEO pay package are curvilinearly related to unsystematic firm risk, i.e. they are highest under conditions of moderate firm-specific risk. Our...

This study used policy capturing to test the ‘figurehead’ assertion that executive pay level contributes to followers' perceptions of a leader's ability. Findings indicated human capital factors including promotion history, degree earned and university prestige all furnished more explanation than pay for CEO ratings. Results challenged the underlyi...

Despite considerable practitioner interest in gainsharing compensation programs, understanding how gainsharing works and, thus, how to improve it in practice is hampered by a lack of a theoretical foundation upon which to build empirically testable models. We use a risk-sharing framework to develop a model of gainsharing that we hope will provide t...

Much research on innovation has addressed managing relatively small product development efforts. in these situations, identification and management of the innovation team and the resulting product is relatively straightforward. However, when the product is very technically complex, requiring the teamwork of hundreds of persons, both employees and c...

This paper builds and tests a holistic model of risk in organizations. Using structural equations modeling, we disaggregated risk into two distinct components, managerial risk taking and income stream uncertainty, or organizational risk. This allowed us to identify an array of organizational and environmental antecedents that have either been exami...

Research into accounting risk-return relations largely relied on reference-based models of managerial choice. This focus ignores other explanations that may contribute to our understanding. Our study extends prior research by incorporating agency theory and implicit contracts theory into models based on the behavioral theory of the firm. We test ou...

Building on agency and prospect theory views, we construct, in this article, a behavioral agency model of executive risk taking. in the model we combine elements of internal corporate governance with problem framing to explain executive risk-taking behavior. The model suggests that executive risk taking varies across and within different forms of m...

The reported research examines the relative contributions of prospect and agency theory explanations for specific operational risks and subsequent firm performance in regulated and unregulated environments. Specifically, this study simultaneously models competing theoretical explanations for risk using three distinct realized operational risks mana...

This paper explores the design of executive compensation using behavioral assumptions regarding choice behavior under uncertainty. The results suggest new ways of viewing compensation design that alleviate the problem of the risk sharing trade-off identified by Beatty and Zajac (1994) and provide new explanations for compensation size.

This article develops and applies a new framework for under standing and interpreting the breadth of executive compensation research and theory. This framework sorts the literature along three dimensions that reflect three basic issues in compensation design: how to pay (specifying the mechanism for linking pay criteria to pay consequences), when t...

Scholars who study organizational decline have argued that declining organizations reduce or eliminate their riskier activities such as innovation. Further, they cite reduced risk-taking as a primary contributor to further decline. Scholars with an interest in risk per se come to the opposite conclusion: low performing firms often take more risks t...

Researchers using prospect theory in explaining Bowman's risk-return paradox have typically assumed a single fixed reference point, normally the industry median, in defining two decision contexts: gain and loss. Our findings suggest this reference point is elevated above industry median performance, and varies over time and across industries indepe...

This study tests Fiegenbaum and Thomas's suggestion that Bowman's risk-return paradox may be due to measuring risk by variance in data that have trends. Results indicate that trends in ROA and ROE cannot explain the pattern of risk-return associations found in previous research.