Essays on Stock Option Compensation and the Role of Incentives and Risk (summary section only)

Managerial pay-for-performance sensitivity has increased rapidly around the world. Early empirical research showed that pay-for-performance sensitivity resulting from stock ownership and stock options appeared to be quite low during the 1970s and early 1980s in the U.S. However, recent empirical research from the U.S. shows an enormous increase in pay-for-performance sensitivity. The global trend has also reached Finland, where stock options have become a major ingredient of executive compensation. The fact that stock options seem to be an appealing form of remuneration from a theoretical point of view combined with the observation that the use of this compensation form has increased significantly during the recent years, implies that research on the dynamics of stock option compensation is highly relevant for the academic community, as well as for practitioners and regulators. The research questions of the thesis are analyzed in four separate essays. The first essay examines whether stock option compensation practices of Finnish firms are consistent with predictions from principal-agent theory. The second essay explores one of the major puzzles in the compensation literature by studying determinants of stock option contract design. In theory, optimal contract design should vary according to firm characteristics. However, in the U.S., variation in contract design seems to be surprisingly low, a phenomenon generally attributed to tax and accounting considerations. In Finland, however, firms are not subject to stringent contracting restrictions, and the variation in contract design tends, in fact, to be quite substantial. The third essay studies the impact of price- and risk incentives arising from stock option compensation on firm investment. In addition, the essay explores one of the most debated questions in the literature, in particular, the relation between incentives and firm performance. Finally, several strands of literature in both economics and corporate finance hypothesize that economic uncertainty is related to corporate decision-making. Previous research has shown that risk tends to slow down firm investment. In the fourth essay, it is hypothesized that firm risk slows down growth from a more universal perspective. Consistent with this view, it is shown that risk not only tends to slow down firm investment, but also employment growth. Moreover, the essay explores whether the nature of firms’ compensation policies, in particular, whether firms make use of stock option compensation, affects the relation between risk and firm growth. In summary, the four essays contribute to the current understanding of stock options as a form of equity incentives, and how incentives and risk affect corporate decision-making. By this, the thesis promotes the knowledge related to the modern theory of the firm.

Hyveiden harjoittaminen : edellytykset ja esteet

In the first half of the 20th century, most moral philosophers took the concept of virtue to be secondary to moral principles or emotions, though in various and mutually conflicting ways. In the early 1960s interest in the virtues was restored by the analytic philosophers Elizabeth Anscombe and Georg Henrik von Wright, the younger colleagues and friends of the late Wittgenstein. Later, Alasdair MacIntyre became a leading virtue ethicist. In 1981, MacIntyre introduced in After Virtue the concept of practices, which he based on the Aristotelian distinction between praxis and poiesis. This dissertation examines MacIntyre s characterization of the interconnectedness between practices and virtues, especially in relation to skills, education, and certain emotions. The primary position of the virtues is defended against the tendency in modern moral philosophy to overemphasize the role either of principles and rules or of emotions. The view according to which rational action and acting according to the virtues is best conceptualized as following rules or principles is criticized by arguments that are grounded by some Wittgensteinian observations, and that can be characterized as transcendental. Even if the virtues cannot be defined by, and are not based entirely on, emotions, the role of certain emotions on the learning and education of skills and virtues are studied more carefully than by MacIntyre. In the cases of resentment, indignation, and shame, the analysis of Peter Strawson is utilized, and in the case of regret, the analysis of Bernard Williams. Williams analysis of regret and moral conflict concludes in a kind of antirealism, which this study criticizes. Where education of practices and skills and the related reactive emotions are examined as conditions of learning and practicing the virtues, institutions and ideologies are examined as obstacles and threats to the virtues. This theme is studied through Karl Marx s conception of alienation and Karl Polanyi s historical and sociological research concerning the great transformation . The study includes six Finnish-published articles carrying the titles Our negative attitudes towards other persons , Authority and upbringing , Moral conflicts, regret and ethical realism , Practices and institutions , Doing justice as condition to communal action: a transcendental argument for justice as virtue , and Alienation from practices in capitalist society: Alasdair MacIntyre s Marxist Aristotelianism . The introductory essay sums up the themes of the articles and presents some central issues of virtue ethics by relating the classical Socratic questions to Aristotelian practical philosophy, as well as to current controversies in metaethics and moral psychology.

Texts "Con and Pro" : The Early Modern Medical Controversy over Tobacco

The habit of "drinking smoke" , meaning tobacco smoking, caused a true controversy in early modern England. The new substance was used both for its alleged therapeutic properties as well as its narcotic effects. The dispute over tobacco continues the line of written controversies which were an important means of communication in the sixteenth and seventeenth century Europe. The tobacco controversy is special among medical controversies because the recreational use of tobacco soon spread and outweighed its medicinal use, ultimately causing a social and cultural crisis in England. This study examines how language is used in polemic discourse and argumentation. The material consists of medical texts arguing for and against tobacco in early modern England. The texts were compiled into an electronic corpus of tobacco texts (1577 1670) representing different genres and styles of writing. With the help of the corpus, the tobacco controversy is described and analyzed in the context of early modern medicine. A variety of methods suitable for the study of conflict discourse were used to assess internal and external text variation. The linguistic features examined include personal pronouns, intertextuality, structural components, and statistically derived keywords. A common thread in the work is persuasive language use manifested, for example, in the form of emotive adjectives and the generic use of pronouns; the latter is especially pronounced in the dichotomy between us and them. Controversies have not been studied in this manner before but the methods applied have supplemented each other and proven their suitability in the study of conflictive discourse. These methods can also be applied to present-day materials.

Publishing for the Masses : Early Modern English Witchcraft Pamphlets

This study is a pragmatic description of the evolution of the genre of English witchcraft pamphlets from the mid-sixteenth century to the end of the seventeenth century. Witchcraft pamphlets were produced for a new kind of readership semi-literate, uneducated masses and the central hypothesis of this study is that publishing for the masses entailed rethinking the ways of writing and printing texts. Analysis of the use of typographical variation and illustrations indicates how printers and publishers catered to the tastes and expectations of this new audience. Analysis of the language of witchcraft pamphlets shows how pamphlet writers took into account the new readership by transforming formal written source materials trial proceedings into more immediate ways of writing. The material for this study comes from the Corpus of Early Modern English Witchcraft Pamphlets, which has been compiled by the author. The multidisciplinary analysis incorporates both visual and linguistic aspects of the texts, with methodologies and theoretical insights adopted eclectically from historical pragmatics, genre studies, book history, corpus linguistics, systemic functional linguistics and cognitive psychology. The findings are anchored in the socio-historical context of early modern publishing, reading, literacy and witchcraft beliefs. The study shows not only how consideration of a new audience by both authors and printers influenced the development of a genre, but also the value of combining visual and linguistic features in pragmatic analyses of texts.

Finlandssvenska åsikter om och attityder till modern språkpåverkan

The study describes and analyzes Finland Swedes attitudes to modern-day linguistic influence, the relationship between informants explicitly reported views and the implicit attitudes they express towards language influence. The methods are primarily sociolinguistic. For the analysis of opinions and attitudes I have further developed and tested a new tool in attitude research. With statistical correlation analysis of data collected through a quantitative survey I describe the views that Swedish-language Finns (N=500) report on the influence of English, on imports, and on domain loss. With experimental matchedguise techniques, I study Finland-Swedes (N=600) subconscious reactions to English imports in spoken text. My results show that the subconscious reactions in some respects differ markedly from the views informants explicitly report that they have: informants respond that they would like English words that come into Swedish to be replaced by Swedish replacement words, but in a matched-guise test on their subconscious attitudes, the informants consider English words in a Swedish context to have a positive effect. The topic is further dealt with in interviews where I examine 36 informants implicit attitudes through interactional sociolinguistic analyses. This study comes close to pragmatic discourse analysis in its focus on pragmatic particles and modality. The study makes a rather strict distinction between explicitly expressed opinions and implicit, subconscious attitudes. The quantitative analyses suggest that the opinions we express can be tied to the explicit in language. The outcome of the matched-guise test shows that it is furthermore possible to find subconscious, implicit attitudes that people in actual situations rely on when they make decisions. The discourse analysis finds many subconscious signals, but it also shows that the signals arise in interaction with one s interlocutor, the situation, and the norms in the society. To account for this I have introduced the concept of socioconscious attitude. Socioconscious attitudes reflect not only the traditions and values the utterer grew up with, but also the speaker s relation to the social situation (s)he takes part in.