Essays on behavioral aspects of the design and disclosure of compensation contracts

This thesis consists of four essays on the design and disclosure of compensation contracts. Essays 1, 2 and 3 focus on behavioral aspects of mandatory compensation disclosure rules and of contract negotiations in agency relationships. The three experimental studies develop psychology- based theory and present results that deviate from standard economic predictions. Furthermore, the results of Essay 1 and 2 also have implications for firms’ discretion in how to communicate their top management’s incentives to the capital market. Essay 4 analyzes the role of fairness perceptions for the evaluation of executive compensation. For this purpose, two surveys targeting representative eligible voters as well as investment professionals were conducted. Essay 1 investigates the role of the detailed ‘Compensation Discussion and Analysis’, which is part of the Security and Exchange Commission’s 2006 regulation, on investors’ evaluations of executive performance. Compensation disclosure complying with this regulation clarifies the relationship between realized reported compensation and the underlying performance measures and their target achievement levels. The experimental findings suggest that the salient presentation of executives’ incentives inherent in the ‘Compensation Discussion and Analysis’ makes investors’ performance evaluations less outcome dependent. Therefore, investors’ judgment and investment decisions might be less affected by noisy environmental factors that drive financial performance. The results also suggest that fairness perceptions of compensation contracts are essential for investors’ performance evaluations in that more transparent disclosure increases the perceived fairness of compensation and the performance evaluation of managers who are not responsible for a bad financial performance. These results have important practical implications as firms might choose to communicate their top management’s incentive compensation more transparently in order to benefit from less volatile expectations about their future performance. Similar to the first experiment, the experiment described in Essay 2 addresses the question of more transparent compensation disclosure. However, other than the first experiment, the second experiment does not analyze the effect of a more salient presentation of contract information but the informational effect of contract information itself. For this purpose, the experiment tests two conditions in which the assessment of the compensation contracts’ incentive compatibility, which determines executive effort, is either possible or not. On the one hand, the results suggest that the quality of investors’ expectations about executive effort is improved, but on the other hand investors might over-adjust their prior expectations about executive effort if being confronted with an unexpected financial performance and under-adjust if the financial performance confirms their prior expectations. Therefore, in the experiment, more transparent compensation disclosure does not lead to more correct overall judgments of executive effort and to even lower processing quality of outcome information. These results add to the literature on disclosure which predominantly advocates more transparency. The findings of the experiment however, identify decreased information processing quality as a relevant disclosure cost category. Firms might therefore carefully evaluate the additional costs and benefits of more transparent compensation disclosure. Together with the results from the experiment in Essay 1, the two experiments on compensation disclosure imply that firms should rather focus on their discretion how to present their compensation disclosure to benefit from investors’ improved fairness perceptions and their spill-over on performance evaluation. Essay 3 studies the behavioral effects of contextual factors in recruitment processes that do not affect the employer’s or the applicant’s bargaining power from a standard economic perspective. In particular, the experiment studies two common characteristics of recruitment processes: Pre-contractual competition among job applicants and job applicants’ non-binding effort announcements as they might be made during job interviews. Despite the standard economic irrelevance of these factors, the experiment develops theory regarding the behavioral effects on employees’ subsequent effort provision and the employers’ contract design choices. The experimental findings largely support the predictions. More specifically, the results suggest that firms can benefit from increased effort and, therefore, may generate higher profits. Further, firms may seize a larger share of the employment relationship’s profit by highlighting the competitive aspects of the recruitment process and by requiring applicants to make announcements about their future effort. Finally, Essay 4 studies the role of fairness perceptions for the public evaluation of executive compensation. Although economic criteria for the design of incentive compensation generally do not make restrictive recommendations with regard to the amount of compensation, fairness perceptions might be relevant from the perspective of firms and standard setters. This is because behavioral theory has identified fairness as an important determinant of individuals’ judgment and decisions. However, although fairness concerns about executive compensation are often stated in the popular media and even in the literature, evidence on the meaning of fairness in the context of executive compensation is scarce and ambiguous. In order to inform practitioners and standard setters whether fairness concerns are exclusive to non-professionals or relevant for investment professionals as well, the two surveys presented in Essay 4 aim to find commonalities in the opinions of representative eligible voters and investments professionals. The results suggest that fairness is an important criterion for both groups. Especially, exposure to risk in the form of the variable compensation share is an important criterion shared by both groups. The higher the assumed variable share, the higher is the compensation amount to be perceived as fair. However, to a large extent, opinions on executive compensation depend on personality characteristics, and to some extent, investment professionals’ perceptions deviate systematically from those of non-professionals. The findings imply that firms might benefit from emphasizing the riskiness of their managers’ variable pay components and, therefore, the findings are also in line with those of Essay 1.

Computer-assisted design and manufacture of implants in the late reconstruction of extensive orbital fractures

To evaluate the use of computer-assisted designed and manufactured (CAD/CAM) orbital wall and floor implants for late reconstruction of extensive orbital fractures.

Sexual health of ethnic minority MSM in Britain (MESH project): design and methods

Background Men who have sex with men (MSM) remain the group most at risk of acquiring HIV infection in Britain. HIV prevalence appears to vary widely between MSM from different ethnic minority groups in this country for reasons that are not fully understood. The aim of the MESH project was to examine in detail the sexual health of ethnic minority MSM living in Britain. Methods/Design The main objectives of the MESH project were to explore among ethnic minority MSM living in Britain: (i) sexual risk behaviour and HIV prevalence; (ii) their experience of stigma and discrimination; (iii) disclosure of sexuality; (iv) use of, and satisfaction with sexual health services; (v) the extent to which sexual health services (for treatment and prevention) are aware of the needs of ethnic minority MSM. The research was conducted between 2006 and 2008 in four national samples: (i) ethnic minority MSM living in Britain; (ii) a comparison group of white British MSM living in Britain; (iii) NHS sexual health clinic staff in 15 British towns and cities with significant ethnic minority communities and; (iv) sexual health promotion/HIV prevention service providers. We also recruited men from two "key migrant" groups living in Britain: MSM born in Central or Eastern Europe and MSM born in Central or South America. Internet-based quantitative and qualitative research methods were used. Ethnic minority MSM were recruited through advertisements on websites, in community venues, via informal networks and in sexual health clinics. White and "key migrant" MSM were recruited mostly through Gaydar, one of the most popular dating sites used by gay men in Britain. MSM who agreed to take part completed a questionnaire online. Ethnic minority MSM who completed the online questionnaire were asked if they would be willing to take part in an online qualitative interview using email. Service providers were identified through the British Association of Sexual Health and HIV (BASHH) and the Terrence Higgins Trust (THT) CHAPS partnerships. Staff who agreed to take part were asked to complete a questionnaire online. The online survey was completed by 1241 ethnic minority MSM, 416 men born in South and Central America or Central and Eastern Europe, and 13,717 white British MSM; 67 ethnic minority MSM took part in the online qualitative interview. In addition 364 people working in sexual health clinics and 124 health promotion workers from around Britain completed an online questionnaire. Discussion The findings from this study will improve our understanding of the sexual health and needs of ethnic minority MSM in Britain.

Synthesis and biological activity of new functionalized epothilones for prodrug design and tumor targeting

Epothilones are potent antiproliferative agents, which have served as successful lead structures for anticancer drug discovery. However, their therapeutic efficacy would benefit greatly from an increase in their selectivity for tumor cells, which may be achieved through conjugation with a tumor-targeting moiety. Three novel epothilone analogs bearing variously functionalized benzimidazole side chains were synthesized using a strategy based on palladium-mediated coupling and macrolactonization. The synthesis of these compounds is described and their in vitro biological activity is discussed with respect to their interactions with the tubulin/microtubule system and the inhibition of human cancer cell proliferation. The additional functional groups may be used to synthesize conjugates of epothilone derivatives with a variety of tumor-targeting moieties.

Randomization in clinical trials in orthodontics: its significance in research design and methods to achieve it

Randomization is a key step in reducing selection bias during the treatment allocation phase in randomized clinical trials. The process of randomization follows specific steps, which include generation of the randomization list, allocation concealment, and implementation of randomization. The phenomenon in the dental and orthodontic literature of characterizing treatment allocation as random is frequent; however, often the randomization procedures followed are not appropriate. Randomization methods assign, at random, treatment to the trial arms without foreknowledge of allocation by either the participants or the investigators thus reducing selection bias. Randomization entails generation of random allocation, allocation concealment, and the actual methodology of implementing treatment allocation randomly and unpredictably. Most popular randomization methods include some form of restricted and/or stratified randomization. This article introduces the reasons, which make randomization an integral part of solid clinical trial methodology, and presents the main randomization schemes applicable to clinical trials in orthodontics.

Design and construction of a new Drosophila species, D.synthetica, by synthetic regulatory evolution

Here, I merge the principles of synthetic biology1,2 and regulatory evolution3-11 to create a new species12-15 with a minimal set of known elements. Using preexisting transgenes and recessive mutations of Drosophila melanogaster, a transgenic population arises with small eyes and a different venation pattern that fulfills the criteria of a new species according to Mayr's "Biological Species Concept"7,10. The genetic circuit entails the loss of a non-essential transcription factor and the introduction of cryptic enhancers. Subsequent activation of those enhancers causes hybrid lethality. The transition from "transgenic organisms" towards "synthetic species", such as Drosophila synthetica, constitutes a safety mechanism to avoid hybridization with wild type populations and preserve natural biodiversity16-18. Drosophila synthetica is the first transgenic organism that cannot hybridize with the original wild type population but remains fertile when crossed with other transgenic animals.

Model-based control of neuromuscular block using mivacurium: design and clinical verification

BACKGROUND: Short-acting agents for neuromuscular block (NMB) require frequent dosing adjustments for individual patient's needs. In this study, we verified a new closed-loop controller for mivacurium dosing in clinical trials. METHODS: Fifteen patients were studied. T1% measured with electromyography was used as input signal for the model-based controller. After induction of propofol/opiate anaesthesia, stabilization of baseline electromyography signal was awaited and a bolus of 0.3 mg kg-1 mivacurium was then administered to facilitate endotracheal intubation. Closed-loop infusion was started thereafter, targeting a neuromuscular block of 90%. Setpoint deviation, the number of manual interventions and surgeon's complaints were recorded. Drug use and its variability between and within patients were evaluated. RESULTS: Median time of closed-loop control for the 11 patients included in the data processing was 135 [89-336] min (median [range]). Four patients had to be excluded because of sensor problems. Mean absolute deviation from setpoint was 1.8 +/- 0.9 T1%. Neither manual interventions nor complaints from the surgeons were recorded. Mean necessary mivacurium infusion rate was 7.0 +/- 2.2 microg kg-1 min-1. Intrapatient variability of mean infusion rates over 30-min interval showed high differences up to a factor of 1.8 between highest and lowest requirement in the same patient. CONCLUSIONS: Neuromuscular block can precisely be controlled with mivacurium using our model-based controller. The amount of mivacurium needed to maintain T1% at defined constant levels differed largely between and within patients. Closed-loop control seems therefore advantageous to automatically maintain neuromuscular block at constant levels.