B-School Research Takes on Office Politics

The latest crop of business school research focuses on CEO pay, knowledge-sharing, and the surprising benefits of employee revenge-taking

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By Francesca Di Meglio

A fresh roundup of interesting and practical research from top business schools has one thing in common: It is all about getting companies to run more smoothly. From determining how pay is doled out to chief executive officers in different geographical areas to recognizing the natural checks and balances of an office, the research is meant to help managers better understand how to operate in times of financial strain, as well as in more promising periods. Here's a rundown of some of the unique research coming out of business schools.

Are U.S. CEOs Underpaid?

All eyes have been on the paychecks of America's top CEOs, who were criticized in the wake of the financial crisis for enjoying bloated salaries while the rest of the country suffered. Such criticism is misguided, says Nuno Fernandes, a researcher and professor of finance at IMD Business School (IMD Full-Time MBA Profile) in Lausanne, Switzerland. Collecting data from the annual reports of companies in 14 countries that mandate pay disclosure, Fernandes and his team found that CEOs in the U.K. are paid slightly more than those in the U.S. , which ranks No. 2.

"U.S. CEOs are not overpaid in comparison to foreign CEOs in similar firms," he adds.

Having standardized the data for characteristics such as company size, the team also learned that the board structure and its influence on decisionmaking had a big impact on pay. In addition, companies investing in the global marketplace and competing for talent internationally tend to have similar pay structures.

Discussions of CEO pay, says Fernandes, lead to discussions of salary regulation. Based on his findings, Fernandes says that there should be no regulations; shareholders should be left to self-regulate. As an example of regulation gone wrong, he cites the million-dollar rule, which prohibits companies from deducting more than $1 million of an executive's salary. Fernandes says that rule encouraged a shift to stock options, which are exempt from the cap.

"Regulation drives up CEO pay and creates more inefficient pay structures," he concludes.

Par for the Course

Inspired by watching Tiger Woods at the height of his golf game, Emily T. Amanatullah, assistant management professor at University of Texas, Austin's McCombs School of Business (McCombs Full-Time MBA Profile), and Francis J.Flynn, professor of organizational behavior at the Stanford Graduate School of Business (Stanford Full-Time MBA Profile), conducted field studies and lab experiments to determine if star golfers (or office mates) motivate or psyche out those paired against them. They discovered that those with reputations as great performers—on the golf course and in the office—motivate others who are working alongside them on independent tasks but psych them out when they are in direct competition.

To see if the results on the golf course match those in the office, the team conducted lab experiments that had people work on individual tasks such as computer games alongside one another and then pitted them against one another in direct competition. The results were the same as those on the golf course. She hopes managers take away from this research how much influence people have on one another.

"The presence of others can affect a person's performance on tasks, even individual tasks," says Amanatullah, whose research was published online in the Journal of Organizational Behavior and Human Processes last summer. "The layout of the office—who is sitting next to whom—can make a difference."