Think Twice Before Going for Incentives: Social Norms and the Principal's Decision on Compensation Contracts

• 成果类型: Article
• 署名作者: Cardinaels, Eddy; Yin, Huaxiang
• 署名单位: KU Leuven; Tilburg University; Nanjing Tech University
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12093
• 发表日期: 2015
• 页码: 985-1015
• 关键词: organizational culture; honesty; INFORMATION; conformity; emergence; demand; trust; US

摘要

Principals make decisions on various issues, ranging from contract design to control system implementation. Few studies examine the principal's active role in these decisions. We experimentally investigate this role by studying how a principal's choice of an incentive contract that may discourage misrepresentation, compared to a fixed-salary contract, affects the honesty of his or her agents' cost reporting. Results show that, besides an incentive effect and a principal trust effect, the active choice for incentives produces a negative information leakage effect. When principals use incentives, their choices not only incentivize truthful reporting and signal distrust, but they also leak important information about the social norm, namely, that other agents are likely to report dishonestly. Agents conform to this social norm by misrepresenting cost information more. Our results have important practical implications. Managers must recognize that their decisions can leak information to their agents, which may produce unanticipated consequences for the social norms of the organization.