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E M P L O Y E E B E N E F I T S , C O M P E N S A T I O N
& P E N S I O N L A W
Vol. 3, No. 20: October 24, 2002
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Publisher: LSN Employment, Labor, Compensation & Pension Journals
a division of
Social Science Electronic Publishing, Inc. (SSEP)
and Social Science Research Network (SSRN)
Editor: PAMELA PERUN
Urban Institute
Mailto:pamela@planetnow.com
Copyright: SSEP, Inc. 2002. All rights reserved.
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Topic of This Issue:
Fundamental Issues
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T A B L E of C O N T E N T S
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NEW and FORTHCOMING ARTICLES
"Reflections on the New Psychological Contract and the Ownership
of Human Capital"
Connecticut Law Review, Vol. 34, 2002
CATHERINE L. FISK
Loyola Law School (Los Angeles)
WORKING PAPERS
"Regulation and the Globalization (Americanization) of Executive
Pay"
BRIAN R. CHEFFINS
Faculty of Law, University of Cambridge
RANDALL S. THOMAS
Vanderbilt University School of Law
"Life-Cycle Finance in Theory and in Practice"
ZVI BODIE
Boston University
School of Management
"A Survey of Behavioral Finance"
NICHOLAS BARBERIS
University of Chicago
Graduate School of Business
National Bureau of Economic Research (NBER)
RICHARD H. THALER
University of Chicago
National Bureau of Economic Research (NBER)
"The Influence of Pensions on Behavior: How Much Do We Really
Know?"
ALAN L. GUSTMAN
Dartmouth College
Department of Economics
National Bureau of Economic Research (NBER)
THOMAS STEINMEIER
Texas Tech University
Economics
National Bureau of Economic Research (NBER)
"The Impact of Employee Stock Options on the Evolution of
Compensation in the 1990s"
HAMID MEHRAN
Federal Reserve Bank of New York
Research Department
JOSEPH TRACY
Federal Reserve Bank of New York
Domestic Research Function
National Bureau of Economic Research (NBER)
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scholarly discourse.
N E W and F O R T H C O M I N G Articles
_________________________________________________________________
"Reflections on the New Psychological Contract and the Ownership
of Human Capital"
Connecticut Law Review, Vol. 34, 2002
BY: CATHERINE L. FISK
Loyola Law School (Los Angeles)
Paper ID: Loyola-LA Public Law Research Paper No. 2002-8
Contact: CATHERINE L. FISK
Email: Mailto:catherine.fisk@lls.edu
Postal: Loyola Law School (Los Angeles)
919 South Albany Street
Los Angeles, CA 90015-0019 UNITED STATES
ABSTRACT:
It has become a cliche of the literature on the modern workplace
that temporary, contingent, or precarious employment has
replaced the long-term employment and job security that was
thought to characterize white-collar, male employment in the
mid-to-late twentieth century. In The New Psychological
Contract: Implications of the Changing Workplace for Labor and
Employment Law, Professor Katherine Van Wezel Stone argues that,
although neither firms nor employees expect that employees will
enjoy the employment security that supposedly characterized
long-term employment relations of the last generation, firms now
promise "employability security." That is, firms promise
employees that the work they do will enhance their employability
by giving them valuable training, experience, and contacts. This
is "the new psychological contract" of employment.
This essay discusses the descriptive, prescriptive, and
doctrinal implications of Stone's claims regarding the ownership
of workplace intellectual property and human capital. The essay
raises modest reservations about Stone's descriptive claim, but
more significant concerns about the prescriptive and doctrinal
implications with respect to trade secrets and the enforcement
of restrictive covenants limiting competitive employment by
former employees. The essay argues that, like other implied in
fact contract theories that have been advocated as a basis for
reforming the inequities of employment law, the new
psychological contract theory is unlikely to effect lasting
change because firms do and will require employees to expressly
contract for non-portable human capital. Drawing on examples
from the historical development of modern law regarding trade
secrets and restrictive covenants, this essay questions the
utility of implied contract theory to effect meaningful
protections for employees. Unless courts are prepared to impose
non-contractual rules about how much firms and employees can
bargain for, no implied contract theory will significantly
increase the portability of most employees' human capital or
employees' control over the intellectual property they create at
work.
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W O R K I N G P A P E R Abstracts
_________________________________________________________________
"Regulation and the Globalization (Americanization) of Executive
Pay"
BY: BRIAN R. CHEFFINS
Faculty of Law, University of Cambridge
RANDALL S. THOMAS
Vanderbilt University School of Law
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=321423
Paper ID: Vanderbilt Law & Economics Research Paper No. 02-05
Date: 2002
Contact: RANDALL S. THOMAS
Email: Mailto:randall.thomas@law.vanderbilt.edu
Postal: Vanderbilt University School of Law
131 21st Avenue South
Nashville, TN 37203-1181 UNITED STATES
Phone: 615-343-3814
Fax: 615-322-6631
Co-Auth: BRIAN R. CHEFFINS
Email: Mailto:BRC21@CAM.AC.UK
Postal: Faculty of Law, University of Cambridge
10 West Road
Cambridge CB3 9DZ, UNITED KINGDOM
Paper Requests:
Contact: Janis Stewart, Joe C. Davis Working Paper Series
Program, Vanderbilt University Law School, 131 21st Avenue
South, Nashville, TN 37203. Phone:(615) 322-0028. Fax:(615)
322-6631. Mailto:Janis.Stewart@law.vanderbilt.edu
ABSTRACT:
This paper analyzes the question of whether there is a
U.S.-oriented convergence trend in international executive pay.
After surveying the essential elements of the American pay
paradigm, we consider market-oriented dynamics that could
constitute a global compensation imperative. We find that it is
difficult to predict how decisive these forces will be, in part
because market factors do not tell the whole story. Rather, it
is necessary to take into account several other variables, such
as legal regulation and business culture. These may stop
convergence from occurring at any point in the near future.
The primary purpose of this paper is to identify and analyze the
variables that will determine whether executive pay convergence
will occur along American lines; therefore, we do not assess in
detail whether such a shift would be a "good thing." However, we
do recognize the tension between the useful function of
U.S.-style pay packages in aligning the interests of
shareholders and executives, while also acknowledging that they
can in certain circumstances constitute self-serving managerial
"rent extraction." Also, the paper makes a significant normative
contribution by identifying obstacles regulators will need to
address if they want to promote convergence and by drawing
attention to rules that could be invoked to hinder the
Americanization of executive pay if this was thought to be the
better way to proceed.
______________________________
"Life-Cycle Finance in Theory and in Practice"
BY: ZVI BODIE
Boston University
School of Management
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=313619
Paper ID: Boston University School of Management Working Paper
No. 2002-02
Date: April 2002
Contact: ZVI BODIE
Email: Mailto:zbodie@bu.edu
Postal: Boston University
School of Management
Finance/Economics
595 Commonwealth Avenue
Boston, MA 02215 UNITED STATES
Phone: (617) 353-4160
Fax: (617) 353 6667
ABSTRACT:
This paper draws upon the modern science of finance to address
several important practical issues in personal finance. Chief
among these is how much to save for retirement and how to invest
those savings. The paper suggests ways that advances in the
theory of finance combined with innovations in financial
contracting technology might be used to improve social welfare
by designing and producing a new generation of user-friendly
life-cycle products for consumers. It contrasts the old
Markowitz single-period paradigm of efficient diversification
with a new Mertonian paradigm that takes account of multi-period
hedging, labor supply flexibility, and habit formation.
Keywords: life-cycle finance, personal investing, personal
financial planning, Markowitz paradigm, Mertonian paradigm
JEL Classification: D11, D91, E21, G11, J2, J26
______________________________
"A Survey of Behavioral Finance"
BY: NICHOLAS BARBERIS
University of Chicago
Graduate School of Business
National Bureau of Economic Research (NBER)
RICHARD H. THALER
University of Chicago
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=332266
Paper ID: NBER Working Paper No. W9222
Date: September 2002
Contact: NICHOLAS BARBERIS
Email: Mailto:fnbarber@gsbfac.uchicago.edu
Postal: University of Chicago
Graduate School of Business
1101 East 58th Street
Chicago, IL 60637 UNITED STATES
Phone: 773-834-0677
Fax: 773-702-0458
Co-Auth: RICHARD H. THALER
Email: Mailto:RICHARD.THALER@GSB.UCHICAGO.EDU
Postal: University of Chicago
Room 205D
1126 East 59th Street
Chicago, IL 60637 UNITED STATES
Paper Requests:
Full-Text downloads are available from SSRN Online for $5.
ABSTRACT:
Behavioral finance argues that some financial phenomena can
plausibly be understood using models in which some agents are
not fully rational. The field has two building blocks: limits to
arbitrage, which argues that it can be difficult for rational
traders to undo the dislocations caused by less rational
traders; and psychology, which catalogues the kinds of
deviations from full rationality we might expect to see. We
discuss these two topics, and then present a number of
behavioral finance applications: to the aggregate stock market,
to the cross-section of average returns, to individual trading
behavior, and to corporate finance. We close by assessing
progress in the field and speculating about its future course.
JEL Classification: G11, G12, G30
______________________________
"The Influence of Pensions on Behavior: How Much Do We Really
Know?"
BY: ALAN L. GUSTMAN
Dartmouth College
Department of Economics
National Bureau of Economic Research (NBER)
THOMAS STEINMEIER
Texas Tech University
Economics
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=308565
Other Electronic Document Delivery:
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s/issue71.pdf
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Paper ID: TIAA-CREF Institute Working Paper No. RD71
Date: March 2002
Contact: ALAN L. GUSTMAN
Email: Mailto:ALAN.L.GUSTMAN@DARTMOUTH.EDU
Postal: Dartmouth College
Department of Economics
6106 Rockefeller Center
Hanover, NH 03755 UNITED STATES
Phone: 603-646-2641
Fax: 603-646-2122
Co-Auth: THOMAS STEINMEIER
Email: Mailto:Thomas.Steinmeier@TTU.EDU
Postal: Texas Tech University
Economics
Lubbock, TX 79409-2101 UNITED STATES
ABSTRACT:
Economists have developed models to explain the impact of
pensions and Social Security on various outcomes, such as
retirement, worker turnover, and saving. However, some recent
research has raised questions about these conventional models.
This issue of Research Dialogue summarizes findings from our
ongoing research on pensions and Social Security. Using data
from the new longitudinal Health and Retirement Study that
reports both the respondents' own knowledge about their pensions
and the actual provisions of their pension plans, our research
emphasizes how well the conventional model does in describing
behavior, answers some of the questions raised by others, and
raises some new questions. We also discuss the implications of
our findings for researchers and policy makers.
JEL Classification: J26, H55, D91, E21, D31, J14, J32
______________________________
"The Impact of Employee Stock Options on the Evolution of
Compensation in the 1990s"
BY: HAMID MEHRAN
Federal Reserve Bank of New York
Research Department
JOSEPH TRACY
Federal Reserve Bank of New York
Domestic Research Function
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=275427
Paper ID: NBER Working Paper No. W8353
Date: July 2001
Contact: HAMID MEHRAN
Email: Mailto:HAMID.MEHRAN@NY.FRB.ORG
Postal: Federal Reserve Bank of New York
Research Department
33 Liberty Street
New York, NY 10045 UNITED STATES
Phone: 212-720-6215
Co-Auth: JOSEPH TRACY
Email: Mailto:JOSEPH.TRACY@NY.FRB.ORG
Postal: Federal Reserve Bank of New York
Domestic Research Function
33 Liberty Street
New York, NY 10045 UNITED STATES
Paper Requests:
Full-Text downloads are available from SSRN Online for $5.
ABSTRACT:
Between 1995 and 1998, actual growth in nominal compensation per
hour (CPH) accelerated from approximately 2 percent to 5
percent. Yet as labor markets continued to tighten in 1999, the
growth in CPH paradoxically slowed. In this article, we attempt
to solve this aggregate wage puzzle by exploring whether changes
in pay structure - specifically, the increased use of employee
stock options - can account for the behavior of CPH in the late
1990s. CPH reflects employee stock options on the date they are
realized rather than on the date they are granted. When we
recalculate CPH growth to reflect the value of current stock
options when they are granted - rather than their value when
they are realized - we find that our adjusted CPH measure
accelerated in each year from 1995 to 1999.