Some 2010 stuff

A couple of books that are about to appear in the UK that caught my eye.

The first is Drive by Dan Pink. Basically he appears to argue for a fairly fundamental reassessment of how we seek to motivate people. There's a WSJ interview here, and his website is here. It looks like it could either be really interesting or a lot of guff - the one-word title and the cover put me off a bit!

Obviously I'm interested in whether anyone in the remuneration field would ever take this kind of thing seriously. At a seminar last year I asked a well-known (infamous?) rem consultant who has a background in psychology whether the incentive schemes in place actually affected behaviour and got a fairly crap answer in response (something along the lines that some people are greedy). It was a strange response given that they had just stated - quite reasonably - that directors would usually do the right thing even if they could cash in by behaving poorly.

There's some emerging interest amongst a handful of investors in looking at some of these other ways of motivating people. Maybe now's the time to have a proper crack at this?

Second is Identity Economics by George Akerlof and Rachel Kranton. Here's the blurb:

Identity economics is a new way to understand people's decisions--at work, at school, and at home. With it, we can better appreciate why incentives like stock options work or don't; why some schools succeed and others don't; why some cities and towns don't invest in their futures--and much, much more.
Identity Economics bridges a critical gap in the social sciences. It brings identity and norms to economics. People's notions of what is proper, and what is forbidden, and for whom, are fundamental to how hard they work, and how they learn, spend, and save. Thus people's identity--their conception of who they are, and of who they choose to be--may be the most important factor affecting their economic lives. And the limits placed by society on people's identity can also be crucial determinants of their economic well-being.

This makes some sense to me as there does appear to be evidence that how people see themselves has an impact on how well they perform. There's a bit in Predictably Irrational, for instance, where Ariely talks about the how Asian women performed differently in tests depending on whether they were encouraged beforehand to think of their identity in terms of either ethnicity or gender.

Two things

1. Nigel fisks a Sunday Times piece on public sector pay.

2. The dumbness of the Tories' Wisdom of Crowds rhetoric is rightly challenged.

Light at the end of the woods

Came across this metaphorical mix-up when Googling for polling stats:

“We’re not out of the woods yet, but at least we can see light at the end of the tunnel,” said a senior Labour official last week.

Needless to say it must be quite hard to see the light at the end of the tunnel if there's a wood in it.

Marr's mistake

My sister got me the book of Andrew Marr's Making of Modern Britain for xmas. I've been having a flick through various interesting sections and came across a bit of a howler in it about George Orwell in the Spanish Civil War:

There he joined the anarchist POUM militia... (page 309)

Anarchist? Isn't the POUM rather famously Trotskyist (though I think some might even dispute that label)? I think it's name was something like the Unified Party of Marxist Workers (I'm not cheating by looking it up). It certainly wasn't anarchist though. The anarchists were the CNT-FAI.

I don't think this is trainspotter-ish. There were quite a few factions on the Left in Spain, but not that difficult to follow. In terms of orientation, size and influence this is a little bit like mixing up the Green Party and the Liberal Democrats today. What's more it's all spelt out very clearly in Homage to Catalonia. Maybe he hasn't read it - which would be odd as it's arguably Orwell's best book.

Ho hum.

TPA troubles

So, the Charity Commission is investigating the Higher Rate Taxpayers Alliance after all. The key issue is really whether their research is political or educational. The TPA's chief exec said the following, which caught my eye:

"All the grants made by the Politics and Economics Research Trust have been for pieces of research which have been carried out with an open mind and to the highest possible academic level," he said.

I'd be interested to see if any of the TPA's research on pensions were funded by these grants, because I don't think they exhibit an openness to different policy options, and they contain factual flaws and misrepresentations. I would certainly struggle to class them as "the highest possible academic level".

The latest remuneration wheeze

The Grauniad reports that some companies are planning to introduce new share schemes that are designed to reduce the amount of tax that executives pay. There are a couple of interesting aspects to the reports. First the quote from PwC:

Jon Terry, head of remuneration at PricewaterhouseCoopers, said: "A number of these restrictive stock-type arrangements will come forward this AGM season."

Err... I think we can take it then that PwC has advised some of its clients on such schemes. If that is the case, maybe investors ought to question PwC about where the initiative came from. Is it remuneration committees, or are rem consultants being proactive?

Second the attitude of the ABI:

"We can't support schemes which end up costing the company more than would otherwise have been the case or simply shift the tax burden from the individual to the company. Shareholders recognise that schemes should be efficient in relation to tax implications, but there is a limit. Shareholders cannot support schemes which are nakedly for the purpose of avoiding tax," he said.

Exactly. What is the gain for investors in all this? Unless we are expecting a mass exodus of executive because of the 50% rate, why should investors feel any need to give their assent to such schemes? And the danger is that if they don't challenge those that are put forward, then the practice will spread, again with no benefit for investors.

Therefore if investors don't think that companies should help executives avoid the tax increase why not simply introduce a policy that they will vote against resolutions seeking authority to introduce such schemes. I'm assuming that as they relate to actual schemes (or amendments to them) they will need a separate resolution. So they could be voted down, rather than simply being targeted via the vote on the rem report.

In addition, if investors find out that it is the rem consultants being proactive (which wouldn't surprise me) why not encourage companies to appoint an alternative firm for future business?

2010 is going to be when we discover if shareholders are really going to change their approach on remuneration, and this issue would seem to be a good litmus test.

Jokes and proper behaviour

A couple of weeks back I mentioned that I think that jokes or humorous stories told at work often carry a moral about appropriate or inappropriate behaviour. This is something that I've blogged about a bit before as it's closely related to the topic of narratives. One of the books I've got in my stack of reading material is The Presentation of Self in Everyday Life by Erving Goffman which is obviously all about the way people behave. And here's a snippet from the introduction which is in the same territory:

Practical jokes and social games are played in which embarrassments which are to be taken unseriously are purposely engineered. Anecdotes from the past - real, embroidered or fictitious - are told and retold, detailing disruptions which occurred [to the way a person presents themself], almost occurred, or occurred and were admirably resolved. There seems to be no grouping which does not have a ready supply of these games, reveries, and cautionary tales, to be used as a source of humour, a catharsis for anxieties, and a sanction for inducing individuals to be modest in their claims and reasonable in their projected expectations.

Incidentally the perspective Goffman developed is known as dramaturgy. This is clearly similar to the the idea of 'dramatism' developed by Kenneth Burke (who gets a mention or two), and about whom I've blogged before. And Burke of course leads on to my old fave Walter Fisher.