Professor Oh awarded SSHRC Insight Development Grant

Congratulations to Seung Hwan (Peter) Oh, Assistant Professor in Accounting, awarded a 2022-2023 SSHRC Insight Development Grant

“Incentive System Design When Earnings Congruence is Low”

Recent studies have shown that the effectiveness of accounting earnings-based measures of performance (e.g., net income) reflecting the firm’s true value changes has been declining significantly over an extended period of time. On the other hand, popular press and practitioners have praised and advocated more widespread use of non-financial measures (e.g., customer satisfaction, product safety, employee welfare, etc.), arguing that these alternative measures can be more effective at increasing shareholder value compared to standard accounting earnings-based metrics. To the extent that self-interested CEOs may be incentivized to pursue their own agendas at the expense of this broad set of stakeholders, inserting the above mentioned (CSR-contingent) non-financial measures as performance criteria in CEOs’ compensation contracts can help align the interests of managers with those of the stakeholders. Professor Oh will investigate (1) how prevalent these non-financial and CSR-based measures are used in performance evaluation process of CEOs in top 1,500 US firms listed in S&P 1,500 index, and (2) how much weights are allocated to these measures (relative to traditional measure such as accounting net income, cashflow, etc.), if they were to be actively used. Further, the study will additionally examine whether adding CSR-related nonfinancial performance metrics in managers’ performance evaluation scheme can be an effective way to improve firm’s future social performance.

Supported in part by funding from the Social Sciences and Humanities Research Council.

En partie financé par le Conseil de recherches en sciences humaines.