A Shareholder Option: Sell; Yes, You Get What You Pay For; But We're Huge in Poughkeepsie
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A Shareholder Option: Sell
Investigations into backdated stock options have rocked more than 100 companies in the past two years. Over 60 top execs have been fired. Still, many analysts insist the scandal won't have any lasting effect on stock prices. They are wrong, say researchers from the University of Miami School of Business, the University of Rochester's Simon Graduate School of Business, and Forensic Economics. In The Effect of the Options Backdating Scandal on the Stock-Price Performance of 110 Accused Companies, the authors found alarming declines in shareholder value at the 110 companies under investigation last fall. Investors who bought stock in these companies 60 days before backdating issues were revealed saw their investments devalued by more than 25 percent. At a time when the Dow has been hitting all-time highs, the companies under investigation-most with flatlining share prices-have lost well over $100 billion in potential value.
Yes, You Get What You Pay For
Are employees less productive when they're paid less-or more productive when they're paid more? Well, both, says Alexandre Mas of the University of California-Berkeley's Haas School of Business. In Pay, Reference Points, and Police Performance, appearing in the Quarterly Journal of Economics, Mas examines how police officers' productivity can be affected by how much money they're awarded in arbitration proceedings. Looking at compensation disputes involving New Jersey police unions, Mas found that when the officers' salary demands were met, the number of crimes they solved over the next two years was 12 percent higher than when they lost. And the further salaries got from the cops' wage demands, the fewer crimes they solved.
But We're Huge in Poughkeepsie
Consumer packaged goods companies-which sell everything from mayonnaise to coffee-tend to measure their success by market share. The bigger the share, the more "national" the brand. But some national brands may not be as "national" as they seem. In Consumer Packaged Goods in the United States: National Brands, Local Branding, forthcoming in the Journal of Marketing Research, researchers from the University of Chicago Graduate School of Business and UCLA's Anderson School of Management found that national brands' sales vary widely from city to city. Folgers and Maxwell House may each control about 26 percent of the market for coffee, but in Des Moines, Folgers's share is five times as big as Maxwell House's, while in Miami, Maxwell House dominates. The media like to depict big brands duking it out on a national stage. "But when you go to the submarket level," says coauthor Jean-Pierre Dube, a professor of marketing at Chicago, "that's not what you see."
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This story appears in the February 19, 2007 print edition of U.S. News & World Report.