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.

Territory Occupancy and Parental Quality as Proxies for Spatial Prioritization of Conservation Areas

In order to maximize their fitness, individuals aim at choosing territories offering the most appropriate combination of resources. As population size fluctuates in time, the frequency of breeding territory occupancy reflects territory quality. We investigated the relationships between the frequency of territory occupancy (2002–2009) vs. habitat characteristics, prey abundance, reproductive success and parental traits in hoopoes Upupa epops L., with the objective to define proxies for the delineation of conservation priority areas. We predicted that the distribution of phenotypes is despotic and sought for phenotypic characteristics expressing dominance. Our findings support the hypothesis of a despotic distribution. Territory selection was non-random: frequently occupied territories were settled earlier in the season and yielded higher annual reproductive success, but the frequency of territory occupancy could not be related to any habitat characteristics. Males found in frequently occupied territories showed traits expressing dominance (i.e. larger body size and mass, and older age). In contrast, morphological traits of females were not related to the frequency of territory occupancy, suggesting that territory selection and maintenance were essentially a male's task. Settlement time in spring, reproductive success achieved in a given territory, as well as phenotypic traits and age of male territory holders reflected territory quality, providing good proxies for assessing priority areas for conservation management.

How Do Software Architects Specify and Validate Quality Requirements?

Software architecture is the result of a design effort aimed at ensuring a certain set of quality attributes. As we show, quality requirements are commonly specified in practice but are rarely validated using automated techniques. In this paper we analyze and classify commonly specified quality requirements after interviewing professionals and running a survey. We report on tools used to validate those requirements and comment on the obstacles encountered by practitioners when performing such activity (e.g., insufficient tool-support; poor understanding of users needs). Finally we discuss opportunities for increasing the adoption of automated tools based on the information we collected during our study (e.g., using a business-readable notation for expressing quality requirements; increasing awareness by monitoring non-functional aspects of a system).

Car Design and Road Crossing Behaviour

Humans possess a highly developed sensitivity for facial features. This sensitivity is also deployed to non-human beings and inanimate objects such as cars. In the present study we aimed to investigate whether car design has a bearing on the behaviour of pedestrians. Methods: An immersive virtual reality environment with a zebra crossing was used to determine a) whether the minimum accepted distance for crossing the street is bigger for cars with dominant appearance than for cars with friendly appearance (Block 1) and b) whether the speed of dominant cars are overestimated compared to friendly cars (Block 2). In Block 1, the participant's task was to cross the road in front of an approaching car at the latest moment. The point of time when entering and leaving the street was measured. In Block 2 they were asked to estimate the speed of each passing car. An independent sample rated dominant cars as being more dominant, angry and hostile than friendly cars. Results: None of the predictions regarding the car design was confirmed. Instead, there was an effect of starting position: From the centre island, participants entered the road significantly later (smaller accepted distance) and left the road later than when starting from the pavement. Consistently, the speed of the cars was estimated significantly lower when standing on the centre island compared to the pavement. When entering the visual size of the cars as factor (instead of dominance), we found that participants started to cross the road significantly later in front of small cars compared to big cars and that the speed of smaller cars was overestimated compared to big cars (size-speed bias). Conclusions: Car size and starting position, not car design seem to have an influence on road crossing behaviour.

Is ego depletion associated with increased distractibility? Results from a basketball free throw task

Objectives: It has been repeatedly demonstrated that athletes in a state of ego depletion do not perform up to their capabilities in high pressure situations. We assume that momentarily available self-control strength determines whether individuals in high pressure situations can resist distracting stimuli. Design/method: In the present study, we applied a between-subjects design, as 31 experienced basketball players were randomly assigned to a depletion group or a non-depletion group. Participants performed 30 free throws while listening to statements representing worrisome thoughts (as frequently experienced in high pressure situations) over stereo headphones. Participants were instructed to block out these distracting audio messages and focus on the free throws. We postulated that depleted participants would be more likely to be distracted. They were also assumed to perform worse in the free throw task. Results: The results supported our assumption as depleted participants paid more attention to the distracting stimuli. In addition, they displayed worse performance in the free throw task. Conclusions: These results indicate that sufficient levels of self-control strength can serve as a buffer against distracting stimuli under pressure.

Ego depletion and persistent performance in a cycling task

We tested the assumption that persistent performance in an exhausting indoor cycling task would depend on momentarily available self-control strength (N = 20 active participants). In a within-subjects design (two points of measurement, exactly seven days apart), participants’ self-control strength was experimentally manipulated (depletion: yes vs. no; order counterbalanced) via the Stroop test before the participants performed a cycling task. In line with our hypothesis, hierarchical linear modelling (HLM) revealed that participants consistently performed worse over a period of 18 minutes when they were ego depleted. In addition, HLM analysis revealed that depleted participants invested less effort in the cycling task, as indicated by their lower heart rate. This effect escalated over time, as indicated by a time × condition interaction. These results indicate that self-control strength is necessary to obtain an optimal level of performance in endurance tasks requiring high levels of persistence. Practical implications are discussed.

Is choking under pressure a consequence of skill-focus or increased distractibility? Results from a tennis serve task

It has been repeatedly demonstrated that athletes often choke in high pressure situations because anxiety can affect attention regulation and in turn performance. There are two competing theoretical approaches to explain the negative anxiety-performance relationship. According to skillfocus theories, anxious athletes’ attention is directed at how to execute the sport-specific movements which interrupts execution of already automatized movements in expert performers. According to distraction theories, anxious athletes are distractible and focus less on the relevant stimuli. We tested these competing assumptions in a between-subject design, as semi-professional tennis players were either assigned to an anxiety group (n = 25) or a neutral group (n = 28), and performed a series of second tennis serves into predefined target areas. As expected, anxiety was negatively related to serve accuracy. However, mediation analyses with the bootstrapping method revealed that this relationship was fully mediated by self-reported distraction and not by skill-focus.

PEDro or Cochrane to Assess the Quality of Clinical Trials? A Meta-Epidemiological Study.

OBJECTIVE There is debate on how the methodological quality of clinical trials should be assessed. We compared trials of physical therapy (PT) judged to be of adequate quality based on summary scores from the Physiotherapy Evidence Database (PEDro) scale with trials judged to be of adequate quality by Cochrane Risk of Bias criteria. DESIGN Meta-epidemiological study within Cochrane Database of Systematic Reviews. METHODS Meta-analyses of PT trials were identified in the Cochrane Database of Systematic Reviews. For each trial PeDro and Cochrane assessments were extracted from the PeDro and Cochrane databases. Adequate quality was defined as adequate generation of random sequence, concealment of allocation, and blinding of outcome assessors (Cochrane criteria) or as trials with a PEDro summary score ≥5 or ≥6 points. We combined trials of adequate quality using random-effects meta-analysis. RESULTS Forty-one Cochrane reviews and 353 PT trials were included. All meta-analyses included trials with PEDro scores ≥5, 37 (90.2%) included trials with PEDro scores ≥6 and only 22 (53.7%) meta-analyses included trials of adequate quality according to the Cochrane criteria. Agreement between PeDro and Cochrane was poor for PeDro scores of ≥5 points (kappa = 0.12; 95% CI 0.07 to 0.16) and slight for ≥6 points (kappa 0.24; 95% CI 0.16-0.32). When combining effect sizes of trials deemed to be of adequate quality according to PEDro or Cochrane criteria, we found that a substantial difference in the combined effect size (≥0.15) was evident in 9 (22%) out of the 41 meta-analyses for PEDro cutoff ≥5 and 10 (24%) for cutoff ≥6. CONCLUSIONS The PeDro and Cochrane approaches lead to different sets of trials of adequate quality, and different combined treatment estimates from meta-analyses of these trials. A consistent approach to assessing RoB in trials of physical therapy should be adopted.

Facial Feedback Affects Perceived Intensity but Not Quality of Emotional Expressions

Motivated by conflicting evidence in the literature, we re-assessed the role of facial feedback when detecting quantitative or qualitative changes in others’ emotional expressions. Fifty-three healthy adults observed self-paced morph sequences where the emotional facial expression either changed quantitatively (i.e., sad-to-neutral, neutral-to-sad, happy-to-neutral, neutral-to-happy) or qualitatively (i.e. from sad to happy, or from happy to sad). Observers held a pen in their own mouth to induce smiling or frowning during the detection task. When morph sequences started or ended with neutral expressions we replicated a congruency effect: Happiness was perceived longer and sooner while smiling; sadness was perceived longer and sooner while frowning. Interestingly, no such congruency effects occurred for transitions between emotional expressions. These results suggest that facial feedback is especially useful when evaluating the intensity of a facial expression, but less so when we have to recognize which emotion our counterpart is expressing.

Does a reference to evaluations contribute to discourse quality? The case of Swiss direct-democratic campaigns on school policy: a conceptual framework

This article examines how references to evaluations in school policy debates contribute to discourse quality. The article consists of two parts: First, it presents a descriptive overview of the references to evidence in direct-democratic campaigns. These results are based on a quantitative content analysis of the newspaper coverage and governmental information documents of 103 direct-democratic Swiss school policy votes. In a second step, it discusses these findings in view of the question of whether the incorporation of evaluation results in policy debates contributes to discourse quality. It presents a conceptual framework, including hypotheses and a research design to answer this question.

Minimally invasive surgery when treating endometriosis has a positive effect on health and on quality of work life of affected women

STUDY QUESTION: What is the effect of the minimally invasive surgical treatment of endometriosis on health and on quality of work life (e.g. working performance) of affected women? SUMMARY ANSWER: Absence from work, performance loss and the general negative impact of endometriosis on the job are reduced significantly by the laparoscopic surgery. WHAT IS KNOWN ALREADY: The benefits of surgery overall and of the laparoscopic method in particular for treating endometriosis have been described before. However, previous studies focus on medical benchmarks without including the patient's perspective in a quantitative manner. STUDY DESIGN, SIZE, DURATION: A retrospective questionnaire-based survey covering 211 women with endometriosis and a history of specific laparoscopic surgery in a Swiss university hospital, tertiary care center. Data were returned anonymously and were collected from the beginning of 2012 until March 2013. PARTICIPANTS/MATERIALS, SETTING, METHODS: Women diagnosed with endometriosis and with at least one specific laparoscopic surgery in the past were enrolled in the study. The study investigated the effect of the minimally invasive surgery on health and on quality of work life of affected women. Questions used were obtained from the World Endometriosis Research Foundation (WERF) Global Study on Women's Health (GSWH) instrument. The questionnaire was shortened and adapted for the purpose of the present study. MAIN RESULTS AND THE ROLE OF CHANCE: Of the 587 women invited to participate in the study, 232 (232/587 = 40%) returned the questionnaires. Twenty-one questionnaires were excluded due to incomplete data and 211 sets (211/587 = 36%) were included in the study. Our data show that 62% (n = 130) of the study population declared endometriosis as influencing the job during the period prior to surgery, compared with 28% after surgery (P < 0.001). The mean (maximal) absence from work due to endometriosis was reduced from 2.0 (4.9) to 0.5 (1.4) hours per week (P < 0.001). The mean (maximal) loss in working performance after the surgery averaged out at 5.7% (12.6%) compared with 17.5% (30.5%) before this treatment (P < 0.001). LIMITATIONS, REASONS FOR CAUTION: The mediocre response rate of the study weakens the representativeness of the investigated population. Considering the anonymous setting a non-responder investigation was not performed. A bias due to selection, information and negativity effects within a retrospective survey cannot be excluded, although study-sensitive questions were provided in multiple ways. The absence of a control group (sham group; e.g. patients undergoing specific diagnostic laparoscopy without treatment) is a further limitation of the study. WIDER IMPLICATIONS OF THE FINDINGS: Our study shows that indicated minimally invasive surgery has a clear positive effect on the wellbeing and working performance of women suffering from moderate to severe endometriosis. Furthermore, national net savings in indirect costs with the present number of surgeries is estimated to be €10.7 million per year. In an idealized setting (i.e. without any diagnosis delay) this figure could be more than doubled. STUDY FUNDING/COMPETING INTERESTS: The study was performed on behalf of the University Hospital of Bern (Inselspital) as one of the leading Swiss tertiary care centers. The authors do not declare any competing interests.

First international external quality assessment of molecular diagnostics for Mers-CoV

BACKGROUND: Since the discovery of Middle East respiratory syndrome coronavirus (MERS-CoV) in 2012, diagnostic protocols were quickly published and deployed globally. OBJECTIVES: We set out to assess the quality of MERS-CoV molecular diagnostics worldwide. STUDY DESIGN: Both sensitivity and specificity were assessed using 12 samples containing different viral loads of MERS-CoV or common coronaviruses (OC43, 229E, NL63, HKU1). RESULTS: The panel was sent to more than 106 participants, of which 99 laboratories from 6 continents returned 189 panel results.Scores ranged from 100% (84 laboratories) to 33% (1 laboratory). 15% of respondents reported quantitative results, 61% semi-quantitative (Ct-values or time to positivity) and 24% reported qualitative results. The major specific technique used was real-time RT-PCR using the WHO recommended targets upE, ORF1a and ORF1b. The evaluation confirmed that RT-PCRs targeting the ORF1b are less sensitive, and therefore not advised for primary diagnostics. CONCLUSIONS: The first external quality assessment MERS-CoV panel gives a good insight in molecular diagnostic techniques and their performances for sensitive and specific detection of MERS-CoV RNA globally. Overall, all laboratories were capable of detecting MERS-CoV with some differences in sensitivity. The observation that 8% of laboratories reported false MERS-CoV positive single assay results shows room for improvement, and the importance of using confirmatory targets.

Planning and reporting of quality-of-life outcomes in cancer trials.

BACKGROUND Information about the impact of cancer treatments on patients' quality of life (QoL) is of paramount importance to patients and treating oncologists. Cancer trials that do not specify QoL as an outcome or fail to report collected QoL data, omit crucial information for decision making. To estimate the magnitude of these problems, we investigated how frequently QoL outcomes were specified in protocols of cancer trials and subsequently reported. DESIGN Retrospective cohort study of RCT protocols approved by six research ethics committees in Switzerland, Germany, and Canada between 2000 and 2003. We compared protocols to corresponding publications, which were identified through literature searches and investigator surveys. RESULTS Of the 173 cancer trials, 90 (52%) specified QoL outcomes in their protocol, 2 (1%) as primary and 88 (51%) as secondary outcome. Of the 173 trials, 35 (20%) reported QoL outcomes in a corresponding publication (4 modified from the protocol), 18 (10%) were published but failed to report QoL outcomes in the primary or a secondary publication, and 37 (21%) were not published at all. Of the 83 (48%) trials that did not specify QoL outcomes in their protocol, none subsequently reported QoL outcomes. Failure to report pre-specified QoL outcomes was not associated with industry sponsorship (versus non-industry), sample size, and multicentre (versus single centre) status but possibly with trial discontinuation. CONCLUSIONS About half of cancer trials specified QoL outcomes in their protocols. However, only 20% reported any QoL data in associated publications. Highly relevant information for decision making is often unavailable to patients, oncologists, and health policymakers.

Owner-perceived, weighted quality-of-life assessments in dogs with spinal cord injuries.

OBJECTIVE To evaluate changes over time in owner-perceived, weighted quality-of-life assessments in dogs with spinal cord injuries and determine whether scores were associated with underlying etiology or with veterinarian-assigned scores for severity of neurologic dysfunction. DESIGN Cohort study. ANIMALS 100 dogs with spinal cord injury. PROCEDURES Duration of dysfunction, modified Frankel neurologic injury score, and etiology were recorded. At initial and recheck (4- to 6-week) evaluations, owners were asked to identify 5 areas or activities they believed had the most influence on their dogs' quality of life, assess their dogs' current status in each area, and provide a weighting for the importance of each area; results were used to construct a weighted quality-of-life score. Owners were also asked to provide a quality-of-life score with a visual analog scale (VAS). RESULTS At initial and recheck evaluations, weighted quality-of-life scores were higher for ambulatory than for nonambulatory dogs. However, scores did not differ among groups when dogs were grouped on the basis of underlying etiology or duration of injury. Dogs with an increase in Frankel score between the initial and recheck evaluations had a significant increase in weighted quality-of-life score, whereas for dogs that did not have any change in Frankel score, initial and recheck weighted quality-of-life scores were not significantly different. CONCLUSIONS AND CLINICAL RELEVANCE Results suggested that owner-assigned, weighted quality-of-life scores for dogs with spinal cord injuries did not vary significantly on the basis of underlying etiology or duration of injury but were higher for ambulatory than for nonambulatory dogs.

Evaluation of a questionnaire for obtaining owner-perceived, weighted quality-of-life assessments for dogs with spinal cord injuries.

OBJECTIVE To evaluate a questionnaire for obtaining owner-perceived, weighted quality-oflife assessments for dogs with spinal cord injuries. DESIGN Evaluation study. Animals-100 dogs with spinal cord injuries and 48 healthy control dogs. PROCEDURES The questionnaire was adapted from a questionnaire (the schedule for the evaluation of individual quality of life-direct weighting) used for human patients. Specifically, owners were asked to identify 5 areas or activities they believed had the most influence on their dogs' quality of life, assess their dogs' current status in each of those areas, and provide a weighting for the importance of each area. Results were used to construct a weighted quality-of-life score ranging from 0 to 100 for each dog. Owners were also asked to provide a quality-of-life score with a visual analog scale (VAS). RESULTS A good correlation was found between weighted and VAS quality-of-life scores. Dogs with spinal cord injuries had weighted quality-of-life scores that were significantly lower than scores for control dogs. Quality-of-life areas and activities provided by owners of dogs with spinal cord injuries were similar to areas and activities provided by owners of healthy control dogs and could mostly be encompassed by 5 broader domains: mobility, play or mental stimulation, health, companionship, and other. CONCLUSIONS AND CLINICAL RELEVANCE Results suggested that the questionnaire could be used to obtain owner-perceived, weighted quality-of-life assessments for dogs with spinal cord injuries. Obtaining owner-perceived quality-of-life assessments for individual dogs should allow veterinarians to better address quality-of-life concerns and expectations of owners.