Amazing leadership

Kevin Lewis

February 27, 2018

Is Fraud Contagious? Co-Worker Influence on Misconduct by Financial Advisors
Stephen Dimmock, William Gerken & Nathaniel Graham
Journal of Finance, forthcoming


Using a novel data set of U.S. financial advisors that includes individuals' employment histories and misconduct records, we show that co-workers influence an individual's propensity to commit financial misconduct. We identify co-workers' effect on misconduct using changes in co-workers caused by mergers of financial advisory firms. The tests include merger-firm fixed effects to exploit the variation in changes to co-workers across branches of the same firm. The probability of an advisor committing misconduct increases if his new co-workers, encountered in the merger, have a history of misconduct. This effect is stronger between demographically similar co-workers.

The Educational Backgrounds of American Business and Government Leaders: Inter-Industry Variation in Recruitment from Elite Colleges and Graduate Programs
Steven Brint & Sarah Yoshikawa
Social Forces, December 2017, Pages 561-590


The paper provides new empirical evidence on the educational backgrounds of US business and government leaders. Analyzing a sample of 3,990 senior executives drawn from 15 sectors, including government, we find significant industry variation. Industries whose products depend primarily on the manipulation of symbolic media were the most likely to recruit from elite colleges. By contrast, industries involved in the transformation of the material world recruited less often from elite colleges, and this was particularly true for industries that employed comparatively few workers with advanced degrees. We find a relatively low level of association between elite undergraduate origins and executive positions in economy and state but greater proportional concentration by graduate business or law school attended. We discuss the different selection criteria used by elite colleges looking for outstanding students and corporations looking for outstanding executives, as well as additional layers of affinity that may lie behind industry differences in recruitment to executive positions.

The macroeconomic environment and the psychology of work evaluation
Nina Sirola & Marko Pitesa
Organizational Behavior and Human Decision Processes, January 2018, Pages 11-24


This research tested the idea that the perception of the state of the macroeconomic environment impacts the psychology underlying an essential organizational function: The evaluation of employees' work and the associated promotion and demotion decisions. We predicted that when the macroeconomic environment is perceived to be more (less) prosperous, people's generalized sense of the extent to which individuals have control over outcomes increases (decreases), leading them to attribute more (less) responsibility for work outcomes to individuals rather than contextual influences. In Study 1, we tested this theory using data from 124,400 respondents surveyed across 57 countries and 19 years and data about objective indicators of their macroeconomic environments. We found that in more prosperous times, people reported a higher generalized sense of control and were less likely to believe that contextual influences, such as luck, matter for work success. In Studies 2 and 3, we manipulated the perception of the macroeconomic environment among employees working in organizations, and we found that those who perceived their economic environment to be more prosperous had a higher generalized sense of control and in turn attributed more responsibility for a work outcome to the individual performing the work, resulting in more extreme promotion and demotion decisions. The consideration of the macroeconomic context of organizational decision making bridges the macro-micro divide in organizational sciences to provide a novel explanation for individual psychology and behavior underlying fundamental organizational processes.

Is Cash Still King: Why Firms Offer Non-Wage Compensation and the Implications for Shareholder Value
Tim Liu et al.
University of North Carolina Working Paper, December 2017


Over the past 40 years, the share of non-wage benefits in employee compensation grew from 5% to 30%. Using disaggregated data from Glassdoor, we first document a series of stylized facts about the availability of non-wage benefits and how these benefits are correlated with firm characteristics. We subsequently test three non-mutually exclusive hypotheses explaining the cross-section of non-wage benefits: (i) tax advantages, (ii) attracting and retaining specific employee groups, and (iii) mitigating the disutility of work. We find empirical evidence in support of all three hypotheses. Moreover, firms with higher rated benefits exhibit larger ex-post equity returns, suggesting that differences in non-cash types of compensation are not fully priced by the market.

Righting a wrong: Retaliation on a voodoo doll symbolizing an abusive supervisor restores justice
Lindie Liang et al.
Leadership Quarterly, forthcoming


When a subordinate receives abusive treatment from a supervisor, a natural response is to retaliate against the supervisor. Although retaliation is dysfunctional and should be discouraged, we examine the potential functional role retaliation plays in terms of alleviating the negative consequences of abusive supervision on subordinate justice perceptions. Based on the notion that retaliation following mistreatment can restore justice for victims, we propose a model whereby retaliation following abusive supervision alleviates the negative effect of abusive supervision on subordinate justice perceptions. In two experimental studies (Study 1 and 2), whereby we manipulated abusive supervision and subordinate symbolic retaliation - in particular, harming a voodoo doll that represents the abusive supervisor - we found general support for our predictions. Theoretical and practical implications are discussed.

The Price of Integrity
Chen Chen, Ying Xia & Bohui Zhang
Monash University Working Paper, January 2018


This paper examines the effect of integrity culture on financing costs. Using the users' accounts information released from, a website designed to facilitate extramarital affairs, we capture integrity culture by measuring the number of users using AsheleyMadison within a firm. We find a strong negative relationship between financee's integrity and financing costs, i.e. bank loan spread and cost of equity. Using the Massachusetts' Alimony Reform Law of 2011 as an exogenous shock to integrity culture and the instrumental variable approach, we establish that the decrease in financee's integrity increases both bank loan spread and cost of equity. In addition, we find that our integrity measure can predict the cross section of stock returns. We further explore how integrity affects financing costs and find that lower integrity level can increase the financing costs through opaque accounting information and excessive risk taking.

A Firm's Information Environment and Employee Wages
John (Jianqiu) Bai, Matthew Serfling & Sarah Shaikh
Northeastern University Working Paper, January 2018


We examine the relation between a firm's information environment and the wages paid to its rank-and-file employees. Using establishment-level Census data, we document that firms with poorer information environments, measured by less readable annual reports and the lack of management earnings forecasts, pay their workers more. This relation is stronger when employees own more stock in their firm, bear greater information acquisition costs, and have more influence in the wage-setting process. We also utilize instrumental variables and exploit the passage of Section 404 of the Sarbanes-Oxley Act as a shock to a firm's information environment and find evidence suggesting a causal effect of disclosures on wages. Overall, these results are consistent with the theory of compensating wage differentials, as employees appear to receive higher wages for bearing additional information risk associated with working for a firm with a poorer information environment.

When sharing hurts: How and why self-disclosing weakness undermines the task-oriented relationships of higher status disclosers
Kerry Roberts Gibson, Dana Harari & Jennifer Carson Marr
Organizational Behavior and Human Decision Processes, January 2018, Pages 25-43


It is generally believed that self-disclosure has positive effects, particularly for relationships; however, we predict and find negative effects in the context of task-oriented relationships. Across three laboratory experiments, we find that both task-relevant (Study 1) and task-irrelevant (Studies 2 and 3) weakness disclosures, made by a higher (versus peer) status coworker during an interdependent task, negatively affected the receiver's perception of the discloser's status and consequently undermined the discloser's influence, encouraged task conflict, and led to lower relationship quality with the discloser. Peer status disclosers did not trigger these negative responses. We find support for perceived vulnerability as the proposed psychological process (Study 3). Specifically, higher (but not peer) status disclosers experience a status penalty after weakness disclosures because these disclosures signal vulnerability, which violates the expectations people have for higher (but not peer) status coworkers. These findings provide insight into the effects of self-disclosing weakness at work and the ways in which high status employees may inadvertently trigger their own status loss.

The Downside of Downtime: The Prevalence and Work Pacing Consequences of Idle Time at Work
Andrew Brodsky & Teresa Amabile
Journal of Applied Psychology, forthcoming


Although both media commentary and academic research have focused much attention on the dilemma of employees being too busy, this paper presents evidence of the opposite phenomenon, in which employees do not have enough work to fill their time and are left with hours of meaningless idle time each week. We conducted six studies that examine the prevalence and work pacing consequences of involuntary idle time. In a nationally representative cross-occupational survey (Study 1), we found that idle time occurs frequently across all occupational categories; we estimate that employers in the United States pay roughly $100 billion in wages for time that employees spend idle. Studies 2a-3b experimentally demonstrate that there are also collateral consequences of idle time; when workers expect idle time following a task, their work pace declines and their task completion time increases. This decline reverses the well-documented deadline effect, producing a deadtime effect, whereby workers slow down as a task progresses. Our analyses of work pace patterns provide evidence for a time discounting mechanism: workers discount idle time when it is relatively distant, but act to avoid it increasingly as it becomes more proximate. Finally, Study 4 demonstrates that the expectation of being able to engage in leisure activities during post-task free time (e.g., surfing the Internet) can mitigate the collateral work pace losses due to idle time. Through examination and discussion of the effects of idle time at work, we broaden theory on work pacing.

The illusion of transparency in performance appraisals: When and why accuracy motivation explains unintentional feedback inflation
Michael Schaerer et al.
Organizational Behavior and Human Decision Processes, January 2018, Pages 171-186


The present research shows that managers communicate negative feedback ineffectively because they suffer from transparency illusions that cause them to overestimate how accurately employees perceive their feedback. We propose that these illusions emerge because managers are insufficiently motivated to engage in effortful thinking, which reduces the accuracy with which they communicate negative feedback to employees. Six studies (N = 1883) using actual performance appraisals within an organization and role plays with MBA students, undergraduates, and online participants show that transparency illusions are stronger when feedback is negative (Studies 1-2), that they are not driven by employee bias (Study 3), and occur because managers are insufficiently motivated to be accurate (Studies 4a-c). In addition, these studies demonstrate that transparency illusions are driven by more indirect communication by the manager and how different interventions can be used to mitigate these effects (Studies 4a-c). An internal meta-analysis including 11 studies from the file drawer (N = 1887) revealed a moderate effect size (d = 0.43) free of publication bias.

The Status-Health Paradox: Organizational Context, Stress Exposure, and Well-being in the Legal Profession
Jonathan Koltai, Scott Schieman & Ronit Dinovitzer
Journal of Health and Social Behavior, March 2018, Pages 20-37


Prior research evaluates the health effects of higher status attainment by analyzing highly similar individuals whose circumstances differ after some experience a "status boost." Advancing that research, we assess health differences across organizational contexts among two national samples of lawyers who were admitted to the bar in the same year in their respective countries. We find that higher-status lawyers in large firms report more depression than lower-status lawyers, poorer health in the American survey, and no health advantage in Canada. Adjusting for income exacerbates these patterns - were it not for their higher incomes, large-firm lawyers would have a greater health disadvantage. Last, we identify two stressors in the legal profession, overwork and work-life conflict, that are more prevalent in the private sector and increase with firm size. Adjusting for these stressors explains well-being differences across organizational contexts. This study documents the role of countervailing mechanisms in health inequality research.

What Do Workplace Wellness Programs Do? Evidence from the Illinois Workplace Wellness Study
Damon Jones, David Molitor & Julian Reif
NBER Working Paper, January 2018


Workplace wellness programs cover over 50 million workers and are intended to reduce medical spending, increase productivity, and improve well-being. Yet, limited evidence exists to support these claims. We designed and implemented a comprehensive workplace wellness program for a large employer with over 12,000 employees, and randomly assigned program eligibility and financial incentives at the individual level. Over 56 percent of eligible (treatment group) employees participated in the program. We find strong patterns of selection: during the year prior to the intervention, program participants had lower medical expenditures and healthier behaviors than non-participants. However, we do not find significant causal effects of treatment on total medical expenditures, health behaviors, employee productivity, or self-reported health status in the first year. Our 95% confidence intervals rule out 78 percent of previous estimates on medical spending and absenteeism. Our selection results suggest these programs may act as a screening mechanism: even in the absence of any direct savings, differential recruitment or retention of lower-cost participants could result in net savings for employers.

First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision
David Gill et al.
Management Science, forthcoming


Rank-order relative-performance evaluation, in which pay, promotion, symbolic awards, and educational achievement depend on the rank of individuals in the distribution of performance, is ubiquitous. Whenever organizations use rank-order relative-performance evaluation, people receive feedback about their rank. Using a real-effort experiment, we aim to discover whether people respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit "first-place loving" and "last-place loathing": that is, subjects work hardest after being ranked first or last. We discuss implications of our findings for the optimal design of performance feedback policies, workplace organizational structures, and incentives schemes.

Translating Time to Cash: Monetizing Non-salary Benefits Can Shift Employment Preferences
Ashley Whillans, Ryan Dwyer and Mateja Perovic
Harvard Working Paper, January 2018


When considering whether or not to accept a job offer, employees often focus too much on salary and not enough on other non-cash benefits that might best promote long-term happiness, such as having more paid time-off. How can we help employees recognize the value of non-salary benefits? One reason that employees may focus too much on salary is because the value of non-salary benefits is difficult to determine. In four studies (N=1,981), we examined whether listing the monetary value of non-salary benefits (e.g., paid time-off) could help individuals better recognize the value of these benefits, thereby shifting their employment preferences. Consistent with this hypothesis, placing a monetary value on non-salary benefits shifted employment preferences. For example, in Studies 1a & 3, participants were more willing to choose a job with a lower starting salary and more paid time-off. In two additional studies (N=1,004), when organizations listed the value of non-salary benefits, these organizations were perceived as providing greater work-life balance and caring more about their employees. In sum, highlighting the monetary value of non-salary rewards can increase the attractiveness of a job offer and help organizations more adeptly signal their empathy toward employees.

Organized Labor and Inventory Stockpiling
Sophia Hamm et al.
Ohio State University Working Paper, January 2018


The literature suggests that the presence of a labor union poses operational risk for firms by reducing operating flexibility. We posit that managers stockpile inventory in response to their heightened operational risk, such as potential strikes, so that managers maintain bargaining power in labor negotiations. Using various union and abnormal inventory measures, we find that union strength is positively associated with firms' inventory holdings. The association is more pronounced (1) if the employees are more skilled and highly paid and therefore are harder to replace, (2) if the firm belongs to a more competitive industry in which inventory stock-out is more detrimental, and (3) if the firm's operating cycle is longer. In addition, we find that the excess inventory accumulated because of a union is detrimental to future performance. Finally, based on the premise that perceived operational risk is made evident by a strike's occurrence, we predict and find that firms' abnormal inventory significantly increases after strikes.

Do players perform for pay? An empirical examination via NFL players' compensation contracts
Seoyoung Kim, Atulya Sarin & Saagar Sarin
Journal of Banking & Finance, March 2018, Pages 330-346


How to properly compensate and incentivize players is an important question in the realm of professional sports, and more broadly, is a central question in contract design. With the increasing use of performance-based compensation packages and tax law favoring such compensation design, a natural question arises as to whether workers do indeed perform for pay. We examine this question in a setting that is not fraught with the typical measurement and identification problems found in many pay-performance settings. Specifically, we examine changes in a NFL player's Win Probability Added (WPA) and Expected Points Added (EPA) in response to his compensation-contract design. Overall, our paper provides evidence that players do indeed perform for (properly designed) pay, and has important implications for future work on compensation and incentive-based contract design.

People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis
Mitchell Hoffman & Steven Tadelis
NBER Working Paper, February 2018


How much do a manager's interpersonal skills with subordinates, which we call people management skills, affect employee outcomes? Are managers rewarded for having such skills? Using personnel data from a large, high-tech firm, we show that survey-measured people management skills have a strong negative relation to employee turnover. A causal interpretation is reinforced by research designs exploiting new workers joining the firm and managers moving jobs. However, people management skills do not consistently improve non-attrition outcomes. Better people managers are themselves more likely to receive higher subjective performance ratings and to be promoted.


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