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May 1998 On average, performance contracts do not improve productivity in China's state enterprises and may even reduce it. But when they contain all the right features-managerial bonds, profit orientation, higher wage elasticity, and lower markup ratios-performance contracts can boost a firm's productivity growth rate by an estimated 10 percent. Performance contracts are widely used to reform state-owned enterprises. By June 1994, there were 565 such contracts in 32 developing countries, used principally to reform large utilities and other monopolies, and roughly another 103,000 in China, where they are also used to reform state manufacturing enterprises. A performance contract is a written agreement between the manager of a state enterprise (who promises to achieve specific targets in a certain time frame) and government (which-usually-promises to award achievement with a bonus or other incentive). Performance contracts are a variant of the pay-for-performance or incentive contracts often used to motivate managers in the private sector. In the public sector, they are viewed as a device to reveal information and motivate managers to exert effort. Shirley and Xu analyze China's experience with performance contracts in more than 400 state enterprises. China is a good place for such a study because no country has ever used them on such a scale or with such a variety of enterprises (mostly in the competitive sector). China also uses many different kinds of contracts, with different targets (more profit-, tax-, or output-oriented). Shirley and Xu find that performance contracts * On average, do not improve productivity in China's state enterprises and may even reduce it. * Are ineffective in competitive firms as well as monopolies. * Do more harm when they provide only weak incentives and when they do not reduce information asymmetry. They find no connection between variables for commitment and the effects of performance contracts. Design matters. When performance contracts contain all the good features-profit orientation, higher wage elasticity, and lower markup ratios-the firm's productivity growth rate could increase as much as 10 percent. The Chinese government was serious about implementing performance contracts, and used measures considerably more radical than other countries used, hailing the contract system as the official national mode for reforming state enterprises. But most of the contracts have had little or no effect on growth rates and the observed frequency of contracts with good provisions is exceedingly low. Perhaps the political economy of incentive contracts in government settings merits further study. Political considerations may preclude the design of incentive contracts for government actors that could produce the sort of productivity gains some private firms have achieved. One observer (Byrd 1991) points out that the central government gave local governments a good deal of discretion in implementing performance contracts and local governments had a tendency to adopt the lowest common denominator, a bare-bones performance contract. This paper-a product of the Development Research Group-is part of a larger effort in the group to understand state enterprises. The authors may be contacted at [email protected] or [email protected].
Globalized Water presents a compilation of voices that forms a unique scientific exploration of contemporary water management models and governance issues. The book describes the water paradox—how a local resource has become a global product—and the implications of this in how we identify challenges and make policy in the water sector. Over the last 20 years, the foundations of local and national water systems have been rocked by a wave of changes. The authors in this book, experts in a wide range of disciplines, address the resulting debates and issues: water as a commodity and patrimony, technological rent, liberalization and privatization, the continuing evolution of water management and policy at the European level, decision making and stakeholder participation, conflict and consensus, and the inevitable growth of counterpowers at the local and international levels, promoted by the advocates of sustainable development. The selected case studies are from Europe (primarily France but also Spain, Germany, the United Kingdom, and Portugal), Latin America (Argentina, Bolivia), the United States, Lebanon, and India. From this diverse collection of comparative perspectives and research methods, Globalized Water seeks to advance interdisciplinary research, contributing to a new and dynamic role for social sciences and governance on water.
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The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
The aim of this edited book is to provide a comprehensive overview of the opportunities and challenges related to innovation for sustainability. Combining work from both emerging and established scholars in different academic fields, this book provides an integrated understanding of the topic from four perspectives. First, the big picture: frameworks, types, and drivers; second, strategy and leadership; third, measurement and assessment and fourth, tools, methods and technologies. Chapter 11 of this book is available open access under a CC BY 4.0 license at link.springer.com. The editors donate their remuneration for this book to conservation organisation the WWF.
As China continues in its evolution from a planned economy to a market economy, and from an agricultural to a manufacturing and service-oriented economy, issues arising from owner diversification, corporate governance, and labor resource allocation have come to the forefront. Most particularly, corporate governance is being focused on as the state continues its withdrawal from direct ownership. This study evaluates short- and medium- term corporate governance issues impacting companies involved in ownership diversification. It examines problems associated with governance such as cost and framework design and makes recommendations concerning the many facets of corporate governance.
The economies of the People's Republic of China and India have seen dramatic growth in recent years. As their respective successes continue to reshape the world's economic landscape, noted Chinese and Indian scholars have studied the two countries' development paths, in particular their rich and diverse experiences in such areas as education, information technology, local entrepreneurship, capital markets, macroeconomic management, foreign direct investment, and state-owned enterprise reforms. Drawing on these studies, ADB has produced a timely collection of lessons learned that serves as a valuable refresher on the challenges and opportunities ahead for developing economies, especially those in Asia and the Pacific.
This review of the Indian power sector at the state level finds that priority should be given to implementing a robust regulatory framework and governance practices to ensure better utility performance.
This collection of papers is from Palgrave's journal Comparative Economic Studies, carefully selected by a team of expert editors, this volumes collates the most sophisticated works to provide the readers with an essential guide to the economic development of China.
In recent years, trust has enjoyed increasing interest from a wide range of parties, including organizations, policymakers, and the media. Perennially linked to turbulence and scandals, the damaging and rebuilding of trust is a contemporary concern affecting all areas of society. Comprising six thematic sections, The Routledge Companion to Trust provides a comprehensive survey of trust research. With contributions from international experts, this volume examines the major topics and emerging areas within the field, including essays on the foundations, levels and theories of trust. It also examines trust repair and explores trust in settings such as healthcare, finance, food supply chains, and the internet. The Routledge Companion to Trust is an extensive reference work which will be a vital resource to researchers and practitioners across the fields of management and organizational studies, behavioural economics, psychology, cultural anthropology, political science and sociology.