Brian J. Hall is Albert H. Gordon Professor of Business Administration at Harvard Business School in the Negotiation, Organizations and Markets (NOM) Unit. Previously, he was an assistant professor of economics in the Harvard Economics Department. Professor Hall received his B.A., M.A., and Ph.D. in economics from Harvard and holds an M.Phil. in economics from Cambridge University. He served on the staff of the President’s Council of Economics Advisers in 1990-91. Previously, Professor Hall served as Executive Vice President and later, Acting CEO, of Alghanim Industries, one of the largest multi-business companies in the Middle East. He also served as the faculty chair of the Global Initiative for the Middle East and North Africa (MENA) region.
Professor Hall teaches and researches in the area of organizational strategy and behavioral economics, with a focus on performance management and incentive systems. He has taught various courses on organizational strategy, incentives, and negotiations in both the MBA and the executive education programs. Most recently, he taught a course called Managing, Organizing and Motivating for Value (MOMV), which focuses on how managers do the two crucial things necessary to success: 1. Motivating value-creating behavior in their organizations through influence, and 2. Organizing, through incentive systems, to encourage value-creating behavior.
Professor Hall’s research has been published in a variety of academic and practitioner-oriented journals including the American Economic Review, the Quarterly Journal of Economics and the Harvard Business Review. He has also written numerous cases in the area of organizational strategy, performance management, corporate governance and incentives. His research is frequently in the national and international financial press and he has been the featured speaker at numerous conferences and symposia. He has provided expert testimony before the U.S. Senate and appeared on CNBC and the News Hour with Jim Lehrer.
Professor Hall is a Faculty Research Fellow at the National Bureau of Economic Research. He has served as a consultant and advisor to many leading international companies in a variety of sectors, including Intel, CITI, Textron, Pratt & Whitney, Duracell and J. P. Morgan. He currently advises the Chairman and CEO of Alghanim Industries.
Alison Wood Brooks, Karen Huang, Nicole Abi-Esber, Ryan W. Buell, Laura Huang and Brian Hall
People often feel malicious envy, a destructive interpersonal emotion, when they compare themselves to successful peers. Across three online experiments and a field experiment of entrepreneurs, we identify an interpersonal strategy that can mitigate feelings of malicious envy in observers: revealing one’s failures. Despite a general reluctance to reveal one’s failures—as they are happening and after they have occurred—across four experiments, we find that revealing both successes and failures encountered on the path to success (compared to revealing only successes) decreases observers’ malicious envy. This effect holds regardless of the discloser’s status and cannot be explained by a decrease in perceived status of the individual. Then, in a field experiment at an entrepreneurial pitch competition, where pride displays are common and stakes are high, we find suggestive evidence that learning about the failures of a successful entrepreneur decreases observers’ malicious envy while increasing their benign envy in addition to decreasing their perceptions of the entrepreneur’s hubristic pride (i.e., arrogance) while increasing their perceptions of the entrepreneur’s authentic pride (i.e., confidence). These findings align with previous work on the social-functional relation of envy and pride. Taken together, our results highlight how revealing failures encountered on the way to success can be a counterintuitive yet effective interpersonal emotion regulation strategy.
Brooks, Alison Wood, Karen Huang, Nicole Abi-Esber, Ryan W. Buell, Laura Huang, and Brian Hall. "Mitigating Malicious Envy: Why Successful Individuals Should Reveal Their Failures." Journal of Experimental Psychology: General (in press).
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Hall, Brian, and Jeffrey B. Liebman. "The Taxation of Executive Compensation." In Tax Policy and the Economy, Volume 14, edited by James Poterba, 1–44. Cambridge, MA: NBER and MIT Press Journals, 2000.
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Hall, Brian J., and David E. Weinstein. "Main Banks, Creditor Concentration, and the Resolution of Financial Distress in Japan." In Finance, Governance, and Competitiveness in Japan, edited by Masahiko Aoki and Gary Saxenhouse. Oxford University Press, 2000.
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Hall, Brian J. "A Better Way to Pay CEOs?" In Executive Compensation and Shareholder Value: Theory and Evidence, edited by D. Yermack and J. Carpenter, 33–44. Kluwer Academic Publishers, 1998.
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Hall, Brian J. "Risk-Taking Incentives and the Cost of Insurance Company Failures." In Alternative Approaches to Insurance Regulation, edited by Robert W. Klein. Kansas City, MO: National Association of Insurance Commissioners, 1998.
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Hall, Brian J., and James G. Bohn. "The Cost of P&C Insurance Company Failures." In The Economics of Property-Casualty Insurance, edited by David Bradford. University of Chicago Press, 1998.
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Hall, Brian J., and David E. Weinstein. "Bank-Based versus Market-Based Financial Systems." In Bank Structure and Competition. Federal Reserve Bank of Chicago, 1997.
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Hall, Brian, and Richard B. Freeman. "Permanent Homelessness in America?" In Labor Markets in Action: Essays in Empirical Economics, edited by R. B. Freeman. Cambridge, MA: Harvard University Press, 1989.
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Karen Huang, Alison Wood Brooks, Ryan W. Buell, Brian Hall and Laura Huang
People often feel malicious envy, a destructive interpersonal emotion, when they compare themselves to successful peers. Across two online experiments and an experimental field study, we identify an interpersonal strategy that can mitigate others’ feelings of malicious envy: revealing one’s failures. People are reticent to reveal their failures—both as they are happening and after they have occurred. However, in two experiments, we find that revealing successes and the failures encountered on the path to success (compared to revealing only successes) decreases observers’ malicious envy. This effect holds regardless of whether the individual is ambiguously or unambiguously successful. Then, in a field experiment set in an entrepreneurial pitch competition, where pride displays are common and stakes are high, we find suggestive evidence that learning about the failures of a successful entrepreneur decreases observers’ malicious envy, increases their benign envy, decreases their perceptions of the entrepreneur’s hubristic pride (i.e., arrogance), and increases their perceptions of the entrepreneur’s authentic pride (i.e., confidence). These findings align with previous work on the social-functional relation of envy and pride. Taken together, our results highlight how revealing the failures encountered on the way to success can be a counterintuitive yet effective interpersonal emotion regulation strategy.
Joshua Schwartzstein, Brian J. Hall, Tiffany Y. Chang, Karim Sameh and Alpana Thapar
This case centers on the United Arab Emirates' (UAE) national goal of raising the happiness of its residents and visitors through ambitious government initiatives. They combined this bold national goal with an accountability structure (incentive plan) built on Key Performance Indicators (KPIs), as more typically done at a company level. A key case protagonist is Ohood Al Roumi: the UAE and the world's first dedicated Minister of State for Happiness and Well-being. She was assigned to this role by Sheikh Mohammed, the Prime Minister and Vice President of the UAE and Ruler of Dubai. Al Roumi attempted to drive national progress towards happiness in UAE society through several means: measuring happiness in the community and happiness with government services, aligning and coordinating government entities towards promoting happiness and positivity at work, and promoting happiness as a lifestyle more generally. The case details the UAE's progress through February 2018. The class discussion gives students a chance to reflect on the role of government in promoting happiness and well-being and how a government could go about encouraging happiness. The UAE in effect implemented a complex incentive scheme with the aim of coordinating attempts to increase happiness and well-being. The connection between the UAE's efforts and incentive schemes emerges in the course of the class discussion, which enables students to reflect on concrete managerial implications of the analysis.
Schwartzstein, Joshua, Brian J. Hall, Tiffany Y. Chang, Karim Sameh, and Alpana Thapar. "Happy UAE." Harvard Business School Case 918-041, April 2018.
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Susanna Gallani, Tiffany Y. Chang, Brian J. Hall and Jee Eun Shin
Buffer decided to release its salaries and compensation calculation formula to the public, and the public reaction was greater and more positive than they would have imagined. The company experienced both an increase in volume and a change in the kinds of inbound applications they received. As the company continued to grow, Buffer's senior leaders continued to revise the compensation formula based on feedback both internally and from the public. Particularly, they hoped to strengthen the link between pay and performance, which in the current version of the formula was incorporated using a loosely defined "experience level" component. However, defining clear performance metrics and experience levels was not an easy task.
Gallani, Susanna, Tiffany Y. Chang, Brian J. Hall, and Jee Eun Shin. "Buffer.com (B)." Harvard Business School Supplement 917-020, May 2017.
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Susanna Gallani, Tiffany Y. Chang, Brian J. Hall and Jee Eun Shin
Social media company Buffer wanted to establish clear company values early in its growth. One of these values was a commitment to transparency in its company practices. Buffer openly shared its business strategies and fundraising decks, among lots of other information. Even when they were hacked, the company live-blogged updates to keep their users informed as the situation unfolded. Having internally released each employee's salary and equity details with no pushback, the company now contemplated sharing compensation information transparently with the general public.
Brian J. Hall, Tiffany Y. Chang and Theresa Morin Hall
This is the (B) case supplement to "P&G Canada: Old Company, New Tricks." It details the outcome of the drastic reduction in office space from eight floors to three floors.
Brian J. Hall, Tiffany Y. Chang and Theresa Morin Hall
P&G Canada faces ongoing global pressure to increase productivity and reduce spending. Thom Lachman, president of P&G Canada, is seemingly out of options that will make a large enough impact without harming the business, until the idea of a radical space reduction strikes him. The case follows Lachman, working closely with Country HR Manager Jane Lewis, from idea inception to the eve of the company-wide transition to a dramatically scaled-down and reorganized office space. In particular, the case provides a basis for discussion surrounding employee motivation—specifically as it is affected by the change management process and workspaces, benefits versus perks, and sorting effects. The (B) case details the outcome of the office space transition.
This note serves as a supplement to any course on incentive design within organizations. The note focuses on the principal difficulties in designing incentive systems, including the tradeoff between objective and subjective performance metrics, how to design incentive systems in team environments, and the inherent problems with designing incentive systems in environments where workers are involved in multiple activities.
Describes issues facing three young founders of a high-tech start-up, including hiring an experienced CEO and negotiating with a potential VC investor. Focuses on the incentive and compensation aspects of negotiating with job candidates (e.g., what percentage of the equity is appropriate to offer) and with venture capitalists (e.g., options-vesting issues). [This case is based on HBS Case 801324 "Stock Options at Virtua.Net."]
This case describes the compensation and performance evaluations at an investment management company. The senior management team of Massachusetts Financial Services (MFS) Investment Management was contemplating an introduction of hedge funds at the firm, but many believed that typical hedge fund manager pay (20% of the upside) would harm the MFS culture, which glorified "star performance but not star egos." The case presents the MFS compensation philosophy and plan (including the plan's emphasis on subjective compensation), the types of people it attracted, the resulting culture, and how the senior management team approached the hedge funds question. It includes side discussion on firm-specific human capital. This is an abridged version of an earlier case.
This case is about a compensation change at an automotive service company in the Middle East. The case allows investigation and analysis of many issues related to compensation design and human resource management, and even change management. The focus of the case is all the ways in which bad incentive design leads to dysfunctional behavior. In particular, a crucial issue is whether individual incentives are best or whether team incentives are best, and why. In the B and C cases, the case rolls out in sequence as more and more information is revealed to students so the unfolding of events keeps students interested and engaged in how to solve the various problems that arise, including a near mutiny.
This case is about a compensation change at an automotive service company in the Middle East. The case allows investigation and analysis of many issues related to compensation design and human resource management, and even change management. The focus of the case is all the ways in which bad incentive design leads to dysfunctional behavior. In particular, a crucial issue is whether individual incentives are best or whether team incentives are best, and why. In the B and C cases, the case rolls out in sequence as more and more information is revealed to students so the unfolding of events keeps students interested and engaged in how to solve the various problems that arise, including a near mutiny.
This case is about a compensation change at an automotive service company in the Middle East. The case allows investigation and analysis of many issues related to compensation design and human resource management, and even change management. The focus of the case is all the ways in which bad incentive design leads to dysfunctional behavior. In particular, a crucial issue is whether individual incentives are best or whether team incentives are best, and why. In the B and C cases, the case rolls out in sequence as more and more information is revealed to students so the unfolding of events keeps students interested and engaged in how to solve the various problems that arise, including a near mutiny.
Brian Hall, Aaron Chadbourne, Vibha Kagzi and Caren Kelleher
This case is about the response of the US government to the excessive compensation of executives following the market collapse of 2008. In particular, the case focuses on the special committee that was formed to oversee and regulate any financial companies that had borrowed money from the US government to stay afloat. The protaganist is Kenneth Feinberg, who is appointed as Special Master for TARP Executive Compensation and who has the challenging task of negotiating compensation amidst all of the many competing interests.
Brian J. Hall, Nicole Shae Bennett and Sara del Nido
This case describes a compensation negotiation between a global HR director and a candidate for a high-level executive position. The situation becomes awkward when the candidate feels insulted because he is given a monetary incentive to join the company more quickly than originally planned. The case provides an opportunity to analyze negotiation strategy and the importance of emotional intelligence and effective interpersonal communication during a negotiation.
Hall, Brian J., Nicole Shae Bennett, and Sara del Nido. "Recruiting Andrew Yard (A)." Harvard Business School Case 911-028, September 2010. (Revised March 2012.)
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Brian J. Hall, Nicole Shae Bennett and Sara del Nido
This case describes a compensation negotiation between a global HR director and a candidate for a high-level executive position. The situation becomes awkward when the candidate feels insulted because he is given a monetary incentive to join the company more quickly than originally planned. The case provides an opportunity to analyze negotiation strategy and the importance of emotional intelligence and effective interpersonal communication during a negotiation.
Hall, Brian J., Nicole Shae Bennett, and Sara del Nido. "Recruiting Andrew Yard (B)." Harvard Business School Supplement 911-029, September 2010. (Revised July 2012.)
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Brian J. Hall, Nicole Shae Bennett and Sara del Nido
This case describes a compensation negotiation between a global HR director and a candidate for a high-level executive position. The situation becomes awkward when the candidate feels insulted because he is given a monetary incentive to join the company more quickly than originally planned. The case provides an opportunity to analyze negotiation strategy and the importance of emotional intelligence and effective interpersonal communication during a negotiation.
Hall, Brian J., Nicole Shae Bennett, and Sara del Nido. "Recruiting Andrew Yard (C)." Harvard Business School Supplement 911-030, September 2010. (Revised July 2012.)
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Brian J. Hall, Andrew Wasynczuk, Jonathan Paul Lim, Sara del Nido and Katherine Dowd
This note briefly describes compensation and incentive issues in one of the major US professional sports leagues, the National Football League (NFL). It first provides some background information on the labor market for players and the salary cap, and then describes incentive issues facing players and their agents.
Hall, Brian J., Andrew Wasynczuk, Jonathan Paul Lim, Sara del Nido, and Katherine Dowd. "Incentives in the NFL (Abridged)." Harvard Business School Background Note 909-029, December 2008.
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MBA student Monroe Davies is asked by a potential employer to determine his own compensation package. This case follows Jim Hummer, President and CEO of Whole Health Management and Davies through a unique recruitment process that raises questions of compensation and employee incentives, negotiation strategy, and human resources management.
In this case we look at the design and development of an unconventional market, where neither money nor traditional "goods" are exchanged. Kidney exchange is an idea pioneered by HBS professor and market designer Alvin Roth and a small group of innovative doctors. This case follows this group as they grapple with some of the complex questions associated with launching a national clearinghouse for kidney exchange. It raised critical questions about why and how value is created in markets and how important moral dilemmas (in this case, the buying and selling of human organs) complicate the connection between market exchange and value creation.
Peter A. Coles, Benjamin Edelman, Brian J. Hall and Nicole Bennett
Despite strong appeal among job seekers and outside recruiters, TheLadders' corporate job listings seem to lag. Could raising prices help solve the problem? TheLadders considers this strategic paradox.
Christopher A. Bartlett, Brian J. Hall and Nicole Bennett
In September 2003, Jeff Immelt challenged the business leaders at GE to come up with "Imagination Breakthroughs," innovative new projects that would serve as the centerpiece of GE's organic growth initiative. Follows the company as these changes are driven through the business units, focusing on GE Transportation as it launches a series of groundbreaking, green products -from the Evolution Locomotive to the Hybrid Locomotive. The growth process transforms the culture within GE Transportation, leading to a redefinition of the marketing role, the implementation of a "growth leader" profile and new decision-making processes to encourage innovation and risk. Finally, presents a critical decision point, as Transportation executives must decide whether or not to support the high-risk Hybrid Locomotive project.
Christopher A. Bartlett, Brian J. Hall and Nicole Bennett
This video features interviews with case protagonists John Dineen, Brett Begole, and Pierre Compte expressing their views on the decision framed by the case. In a second part of the tape the protagonists describe what they decided to do. A third segment features John Dineen describing how he communicated his decision to key managers on different sides of the issue. And a final video segment describes the outcome of the decisions.
In the mid-1980s, Arrow, the world's largest electronics distributor, implemented a college recruiting program to hire salespeople. The program was part of an effort to increase the professionalism and skill set of the sales force in an industry where few salespeople had college degrees. After an expensive and thorough training program, many of the new college grads hired were poached by Arrow's competitors for higher salaries. Arrow was ultimately unsuccessful in persuading the college grads to stay, and the recruiting program ended after five years. In 1997, CEO Steve Kaufman decided to start a new college recruiting program, determined not to repeat the mistakes of the past. A rewritten version of an earlier case.
Serves as a brief introduction to incentive design and implementation. The analysis first locates incentive strategy within the larger structure of organizations and markets and then helps to define the central components and difficulties of incentive design. Focuses on the principal difficulties in implementing incentive systems, including the tradeoff between objective and subjective performance metrics, how to design incentive systems in team environments, and the inherent problems with designing incentive systems in environments where workers are involved in multiple activities. A rewritten version of an earlier note.
Joe Bachelder was the leading executive pay negotiator in the United States, securing generous contracts for CEOs and executives at Fortune 500 companies. The CEO of Victor Sports Co. resigned, and the board offered the job to Charles Suarez, a star executive from a competitor. Suarez retained Bachelder's services and the negotiation commenced. It soon ran into difficulty when Suarez and Bachelder proposed a contract with very different terms than Victor offered: Suarez asked for a much higher compensation package with a large stock option grant. The board had to decide whether to increase their offer, and Suarez had to decide whether he was willing to accept less than he originally proposed.
Barro, Jason R., Brian J. Hall, and Aaron Zimmerman. "Joe Bachelder: Executive Pay Negotiator." Harvard Business School Case 904-030, October 2003. (Revised November 2004.)
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After Charles Suarez's failed compensation negotiations with Victor, Suarez's attorney, Joe Batchelder, joined class discussions of the case in a course taught by Professor Brian Hall. Professor James Sebenius also interviewed Joe Bachelder at length on this case and related issues of negotiation and executive compensation. A significantly edited, elaborated, and composite version of Bachelder's informal remarks in these two settings follows: Joe Bachelder: Executive Pay Negotiator (904030), by Jason R. Barro, Brian J. Hall, and Aaron M.G. Zimmerman.
Investigates the "controllability problem" inherent in bonus systems. Ideally, an incentive system accurately measures performance in areas that the individual can control. But most measures are either too broad, including factors outside the influence of the employee, like team or industry performance, or they are too narrow. That is, the performance measures are too easily controlled, and thus gamed by the employee. In this case, Production Manager Phil Evans' initial bonus plan is based on plant profitability, treating the plant as a profit center. But revenues are outside his control, leading him to protest when sales fall. In the revised bonus system, where Evans is rewarded for controlling costs, the plant is treated as a cost center. However, accidents in the plant and a new inspection policy increase his costs. His renewed protests create a dilemma for Regional President Sarah Clark.
Barro, Jason R., Brian J. Hall, and Aaron Zimmerman. "Hearthside Homes." Harvard Business School Case 904-003, September 2003. (Revised September 2004.)
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This case analyzes incentive strategy from the perspective of a company's board of directors and owners. The focus is the role that executive compensation and ownership structure (the composition of, and financial structure between, a company's owners) play in motivating value-creating behavior.
This case serves as a supplement to any course on incentive design and implementation. The analysis first locates incentive strategy within the larger structure of organizations and markets and then helps to define the central components and difficulties of incentive design. The case focuses on the principal difficulties in implementing incentive systems, including the trade off between objective and subjective performance metrics, how to design incentive systems in team environments, and the inherent problems with designing incentive systems in environments where workers are involved in multiple activities.
Akamai's stock price declines dramatically with the NASDAQ in 2000, causing virtually all employee options to go underwater. Ownership and retention incentives are largely destroyed, and employee morale falls sharply. Management weighs the pros and cons of various alternative "solutions" to this problem (including repricing, issuing a new supplemental grant, canceling the underwater options and issuing a delayed regrant, and making a tender offer to exchange underwater options for fewer shares of restricted stock).
Hall, Brian J., and Jonathan Lim. "Akamai's Underwater Options (A) and (B) TN." Harvard Business School Teaching Note 902-200, March 2002.
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This exercise provides an opportunity to gain insight about designing, negotiating, and responding to incentives. The setting is investment management. A class is divided into a certain number of investment firms. Each company has one CEO and begins with four portfolio managers (PMs), who manage their portfolios by choosing from a restricted set of assets. The game takes place over approximately two weeks and is divided into three periods. Each period will last from two to four days. At the end of each period, new funds flow to high-performing portfolios, wheras funds flow out of poorly performing portfolios, simulating contributions from investors. CEOs and PMs negotiate compensation arrangements and PMs may move from one company to another, subject to some costs and rules regarding how much of their portfolio they take with them to their new companies. CEOs try to maximize the value of their companies at the end of the game, whereas PMs attempt to maximize their total compensation during the game.
Barro, Jason R., Brian J. Hall, and Jonathan Lim. "Incentives Game, The." Harvard Business School Exercise 902-197, February 2002. (Revised December 2003.)
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This case describes the compensation and performance evaluations at an investment management company. The senior management team of Massachusetts Financial Services (MFS) Investment Management was contemplating an introduction of hedge funds at the firm, but many believed that typical hedge fund manager pay (20% of the upside) would harm the MFS culture, which glorified "star performance but not star egos." The case presents the MFS compensation philosophy and plan (including the plan's emphasis on subjective compensation), the types of people it attracted, the resulting culture, and how the senior management team approached the hedge funds question. It includes side discussion on firm-specific human capital.
This case describes compensation and incentive issues in one of the major U.S. professional sports leagues, the National Football League (NFL). It first provides some background information on the labor market for players and the salary cap and then describes incentive issues facing players and their agents.
Discusses the effects of option dilution on stock prices and shareholder value. To simplify the example and isolate the complexity of option dilution, we make a number of simplifying assumptions.
This case describes the compensation system for portfolio managers at Harvard's portfolio management company, including its formulaic and bonus bank features. Harvard Management Co. President Jack Meyer explains the philosophy behind the incentive pay at his company.
Brian J. Hall, Guhan Subramanian and Christopher A Rose
In 1996, U.S. Surgical launched a hostile takeover bid against Circon Corp. After building the company for 20 years, CEO Richard Auhll takes a defensive stand that includes inviting an old HBS friend (George Cloutier) to join the fight as a director of Circon. A "poison pill" and a staggered board serve as primary defense measures, leading to the longest-running takeover battle in U.S. corporate history. Issues of loyalty to a friend, executive incentives, executive entrenchment, and duty to shareholders collide as Cloutier realizes crucial corporate governance decisions have to be made.
Hall, Brian J., Guhan Subramanian, and Christopher A Rose. "Circon (A)." Harvard Business School Case 801-403, March 2001. (Revised December 2003.)
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Brian J. Hall, Christopher Rose and Guhan Subramanian
In 1996, U.S. Surgical launched a hostile takeover bid against Circon Corp. CEO Richard Auhll recruited an old HBS friend, George Cloutier, to the Circon board to help him defend the company. Circon's primary defenses include a "poison pill" and a staggered board and lead to the longest-running takeover battle in U.S. corporate history. This is an abridged version of an earlier case.
Hall, Brian J., Christopher Rose, and Guhan Subramanian. "Circon (A) (Abridged)." Harvard Business School Case 904-023, December 2003. (Revised August 2004.)
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Hall, Brian J., Guhan Subramanian, and Christopher A Rose. "Circon (B)." Harvard Business School Supplement 801-404, March 2001. (Revised May 2002.)
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Hall, Brian J., Guhan Subramanian, and Christopher A Rose. "Circon (C)." Harvard Business School Supplement 801-405, March 2001. (Revised December 2001.)
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This case consists of two parts. Part one contains portions of a panel discussion on corporate governance, the poison pill, and hostile takeover attempts/defenses. Part two contains clips from separate visits by George Cloutier and Richard Auhll to the HBS classroom.
Hall, Brian J., Guhan Subramanian, and Joseph N. Sanberg. "Circon (A), (B) and (C) (TN)." Harvard Business School Teaching Note 902-220, May 2002.
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Describes three performance measures for "plants" or businesses: cost centers, revenue centers, and profit centers. Discusses what should be done if a function outside of the "controllability" of the manager affects the performance measure and therefore compensation.
Brian J. Hall, Noam T. Wasserman and Carleen Madigan
Describes issues facing three young founders of a high-tech start-up in Silicon Valley, including hiring an experienced CEO and negotiating with a potential VC investor. Focuses on the incentive and compensation aspects of negotiating with job candidates (e.g., what percentage of the equity is appropriate to offer) and with venture capitalists (e.g., options-vesting issues).
This case describes the pay packages offered to Sara Becker, a graduating MBA student, including detailed information about two stock option packages (one of which is an indexed option package). She gathers the information and attempts to compare those compensation offers.
Tufano, Peter, Brian J. Hall, and Joshua Musher. "Sara's Options." Harvard Business School Case 201-005, August 2000. (Revised July 2002.)
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Brian J. Hall, Joshua Musher, Jonathan Lim and Aaron Zimmerman
Teaching Note for (9-201-005).
Citation:
Hall, Brian J., Joshua Musher, Jonathan Lim, and Aaron Zimmerman. "Sara's Options, TN." Harvard Business School Teaching Note 902-194, May 2002.
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Describes a company's changing of its compensation and incentive plan. In particular, it shows how a change from hourly pay to piece rate pay (for windshield installers) affected productivity, pay, and turnover.
Barro, Jason R., and Brian J. Hall. "Performance Pay at Safelite Auto Glass (A) and (B) TN." Harvard Business School Teaching Note 902-187, April 2002. (Revised April 2002.)
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Describes a company's struggles in implementing a subjective performance rating system for its employees. In particular, it describes the difficulties faced by the CEO in getting managers to combat "ratings inflation"--that is, to produce numerical ratings that are both differentiated and "not too high."
Two young and inexperienced MBAs buy a virtually bankrupt company. They design a decentralized control system organized around profit centers. As a case in control systems, there is ample detail for a discussion of design issues, control of independent profit centers, and details about decentralized control. A rewritten version of an earlier case.
Gerald Weiss left Wall Street for the promise of a CFO position at a well-established corporation. He was given a 10-year options package with a guaranteed floor of $12 million and unlimited upside. To ensure the entire package would be worth at least $12 million after 10 years, Gerald negotiated a special provision, which gave him the ability to "gross-up" his options twice over those ten years. If the stock price fell substantially, Gerald would be awarded more options (at-the-money) to bring the entire Black-Scholes value of his package back up to $12 million. Because of the company's culture of informality, the deal was agreed to with a handshake from the CEO, witnessed by the current CFO and the VP of human resources, but not written down. When the stock price actually fell, and Gerald asked to revalue his options package, the company reneged on the deal. Teaching Objective: To generate discussion about the benefits and pitfalls of mega-option grants, the issue of revaluing options, and the conflict between adhering to company culture and protecting the financial interests of the employee.
Al Dunlap was one of the best-known corporate turnaround artists of the 1990s. In 1996, he was hired at Sunbeam to effect a restructuring, but was fired almost two years later when the company's financial performance and stock price began to decline. Many of the controversies that had surrounded him at his previous job, Scott Paper, followed him to Sunbeam: his rejection of the multiple stakeholder view of corporate governance, his aggressive managerial style, his shaky relations with the media, and his high level of pay. The case describes Dunlap's compensation package at Sunbeam and addresses the issue of how U.S. companies compensate "superstar" CEO's.
Hall, Brian J., Rakesh Khurana, and Carleen Madigan. "Al Dunlap at Sunbeam." Harvard Business School Case 899-218, April 1999. (Revised December 2003.)
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Randolph B. Cohen, Brian J. Hall and Luis M. Viceira
Executive stock options create incentives for executives to manage firms in ways that maximize firm market value. Since options increase in value with the volatility of the underlying stock, executive stock options provide managers with incentives to take actions that increase firm risk. We find that executives respond to these incentives. There is a statistically significant relationship between increases in option holdings by executives and subsequent increases in firm risk. This relationship is robust to the inclusion of fixed effects, year effects, and a variety of other controls and does not seem to be driven by reverse causality. However, the estimated effect on risk-taking is small and we do not find a negative (or positive) market response to option-induced risk-taking. In sum, although options appear to increase firm risk, there is no evidence that this effect is either large or damaging to shareholders.
