What are some risks associated with involving employees in pay-related decisions?

• Ambrus A, Greiner B, Pathak PA (2015) How individual preferences are aggregated in groups: an experimental study. J Public Econ 129:1–13

  Article  Google Scholar 

• Asai K (2016) Is capping executive bonuses useful? International Monetary Fund 16/196

• Baker RJ, Laury SK, Williams AW (2008) Comparing small-group and individual behavior in lottery-choice experiments. South Econ J 75:367–382

  Google Scholar 

• Banerjee AV (1992) A simple model of herd behavior. Q J Econ 107:797–817

  Article  Google Scholar 

• Bault N, Coricelli G, Rustichini A (2008) Interdependent utilities: how social ranking affects choice behavior. PLoS One. //doi.org/10.1371/journal.pone.0003477

  Article  Google Scholar 

• Bennett B, Bettis JC, Gopalan R, Milbourn T (2017) Compensation goals and firm performance. J Financ Econ 124:307–330

  Article  Google Scholar 

• Bicchieri C (2006) The grammar of society: the nature and dynamics of social norms. Cambridge University Press, Cambridge

  Google Scholar 

• Bikhchandani S, Hirshleifer D, Welch I (1992) A theory of fads, fashion, custom, and cultural change as informational cascades. J Polit Econ 100:992–1026

  Article  Google Scholar 

• Blasi JR, Freeman RB, Mackin C, Kruse DL (2010) Creating a bigger pie? The effects of employee ownership, profit sharing, and stock options on workplace performance. In: Kruse DL, Freeman RB, Blasi JR (eds) Shared capitalism at work: employee ownership, profit and gain sharing, and broad-based stock options. The University of Chicago Press, Chicago, pp 139–165

  Chapter  Google Scholar 

• Bolino MC, Kacmar KM, Turnley WH, Gilstrap JB (2008) A multi-level review of impression management motives and behaviors. J Manag 34:1080–1109

  Google Scholar 

• Bolton GE, Ockenfels A, Stauf J (2015) Social responsibility promotes conservative risk behavior. Eur Econ Rev 74:109–127

  Article  Google Scholar 

• Bougheas S, Nieboer J, Sefton M (2013) Risk-taking in social settings: group and peer effects. J Econ Behav Organ 92:273–283

  Article  Google Scholar 

• Brown B, O’Hara K (2003) Place as a practical concern of mobile workers. Environ Plan A 35:1565–1587

  Article  Google Scholar 

• Brunette M, Cabantous L, Couture S (2015) Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study. Theor Decis 78:357–376

  Article  Google Scholar 

• Bushman RM, Indjejikian RJ, Smith A (1995) Aggregate performance measures in business unit manager compensation: the role of intrafirm interdependencies. J Account Res 33:101–128

  Article  Google Scholar 

• Chong VK, Khudzir NF (2018) The effect of mutual monitoring and need for achievement on budgetary slack in a team-based environment. In: Karim KE (ed) Advances in accounting behavioral research 21. Emerald Publishing Limited, Bingley, pp 1–19

  Google Scholar 

• Church BK, Hannan RL, Kuang X (2012) Shared interest and honesty in budget reporting. Account Organ Soc 37:155–167

  Article  Google Scholar 

• Davis JH (1992) Some compelling intuitions about group consensus decisions, theoretical and empirical research, and interpersonal aggregation phenomena: selected examples 1950–1990. Organ Behav Hum Decis Process 52:3–38

  Article  Google Scholar 

• Di Cagno D, Sciubba E, Spallone M (2012) Choosing a gambling partner: testing a model of mutual insurance in the lab. Theor Decis 72:537–571

  Article  Google Scholar 

• Directive 2013/36/EU. CRD IV. European Parliament and the Council. Off J Eur Union. June 26. //eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:176:0338:0436:En:PDF

• Ertac S, Gurdal MY (2012) Deciding to decide: gender, leadership and risk-taking in groups. J Econ Behav Organ 83:24–30

  Article  Google Scholar 

• Fischbacher U (2007) z-Tree: Zurich toolbox for ready-made economic experiments. Exp Econ 10:171–178

  Article  Google Scholar 

• FitzRoy F, Kraft K (1987) Cooperation, productivity, and profit sharing. Q J Econ 102:23–35

  Article  Google Scholar 

• Garner JL, Kim WY (2010) Does a salary cap really work?. //papers.ssrn.com/sol3/papers.cfm?abstract_id=1546783

• Global Workplace Analytics (2020) Telecommuting trend data (updated March 13, 2020). //globalworkplaceanalytics.com/telecommuting-statistics. Accessed 1 Oct 2020

• Gneezy U, Potters J (1997) An experiment on risk-taking and evaluation periods. Q J Econ 112:631–645

  Article  Google Scholar 

• Goffman E (1959) The presentation of self in everyday life. Doubleday, Garden City

  Google Scholar 

• Hakenes H, Schnabel I (2014) Bank bonuses and bailouts. J Money Credit Bank 46:259–288

  Article  Google Scholar 

• Hannan RL, Towry KL, Zhang Y (2013) Turning up the volume: an experimental investigation of the role of mutual monitoring in tournaments. Contemp Account Res 30:1401–1426

  Article  Google Scholar 

• Harris L (2003) Home-based teleworking and the employment relationship: managerial challenges and dilemmas. Pers Rev 32:422–437

  Article  Google Scholar 

• Harrison GW, Lau MI, Rutström EE, Tarazona-Gómez M (2013) Preferences over social risk. Oxf Econ Pap 65:25–46

  Article  Google Scholar 

• Hirst A (2011) Settlers, vagrants and mutual indifference: unintended consequences of hot-desking. J Organ Chang Manag 24:767–788

  Article  Google Scholar 

• Hislop D, Axtell C (2007) The neglect of spatial mobility in contemporary studies of work: the case of telework. N Technol Work Employ 22:34–51

  Article  Google Scholar 

• Holmstrom B (1982) Moral hazard in teams. Bell J Econ 13:324–340

  Article  Google Scholar 

• Jones EE, Pittman TS (1982) Toward a general theory of strategic self-presentation. In: Suis J (ed) psychological perspectives on the self. Lawrence Erlbaum Associates Publishers, Hillsdale, pp 231–262

  Google Scholar 

• Keating AS (1997) Determinants of divisional performance evaluation practices. J Account Econ 24:243–273

  Article  Google Scholar 

• Keck S, Diecidue E, Budescu DV (2014) Group decisions under ambiguity: convergence to neutrality. J Econ Behav Organ 103:60–71

  Article  Google Scholar 

• Keller LR, Sarin RK, Sounderpandian J (2007) An examination of ambiguity aversion: are two heads better than one? Judgm Decis Mak 2:390–397

  Google Scholar 

• Kreilkamp N, Matanovic S, Sommer F, Wöhrmann A (2020) The effect of compensation caps on risk-taking. J Manag Account Res. //doi.org/10.2308/JMAR-18-053

  Article  Google Scholar 

• Lahno AM, Serra-Garcia M (2015) Peer effects in risk-taking: envy or conformity? J Risk Uncertain 50:73–95

  Article  Google Scholar 

• Lazear EP, Shaw KL (2007) Personnel economics: the economist’s view of human resources. J Econ Perspect 21:91–114

  Article  Google Scholar 

• Leary MR, Kowalski RM (1990) Impression management: a literature review and two-component model. Psychol Bull 107:34–47

  Article  Google Scholar 

• Lefebvre M, Vieider FM (2013) Reining in excessive risk-taking by executives: the effect of accountability. Theor Decis 75:497–517

  Article  Google Scholar 

• Lefebvre M, Vieider FM (2014) Risk-taking of executives under different incentive contracts: experimental evidence. J Econ Behav Organ 97:27–36

  Article  Google Scholar 

• Lill JB (2020) When the Boss is far away and there is shared pay: the effect of monitoring distance and compensation interdependence on performance misreporting. Account Organ Soc 86:1–11

  Article  Google Scholar 

• Linde J, Sonnemans J (2012) Social comparison and risky choices. J Risk Uncertain 44:45–72

  Article  Google Scholar 

• Luft J, Shields MD (2009) Psychology models of management accounting. Found Trends Manag Account 4:199–345

  Article  Google Scholar 

• Ma C (1988) Unique implementation of incentive contracts with many agents. Rev Econ Stud 55:555–571

  Article  Google Scholar 

• Maas VS, van Rinsum M (2013) How control system design influences performance misreporting. J Account Res 51:1159–1186

  Article  Google Scholar 

• Mas A, Moretti E (2009) Peers at work. Am Econ Rev 99:112–145

  Article  Google Scholar 

• Masclet D, Colombier N, Denant-Boemont L, Lohéac Y (2009) Group and individual risk preferences: a lottery-choice experiment with self-employed and salaried workers. J Econ Behav Organ 70:470–484

  Article  Google Scholar 

• Merriman K (2008) Low-trust teams prefer individualized pay. Harv Bus Rev 86:32

  Google Scholar 

• Murphy KJ (2001) Performance standards in incentive contracts. J Account Econ 30:245–278

  Article  Google Scholar 

• Murphy KJ (2013) Regulating banking bonuses in the European Union. A case study in unintended consequences. //papers.ssrn.com/sol3/papers.cfm?abstract_id=2235395

• Nalbantian HR, Schotter A (1997) Productivity under group incentives: an experimental study. Am Econ Rev 87:314–341

  Google Scholar 

• Nieboer J (2015) Group member characteristics and risk-taking by consensus. J Behav Exp Econ 57:81–88

  Article  Google Scholar 

• Orr S (2001) The economics of shame in work groups: how mutual monitoring can decrease cooperation in teams. KYKLOS 54:49–66

  Article  Google Scholar 

• Rothschild M, Stiglitz JE (1970) Increasing risk: I. A definition. J Econ Theor 2:225–243

  Article  Google Scholar 

• Schedlinsky I, Sommer F, Wöhrmann A (2016) Risk-taking in tournaments: an experimental analysis. J Bus Econ 86:837–866

  Google Scholar 

• Sheremeta RM, Zhang J (2010) Can groups solve the problem of over-bidding in contests? Soc Choice Welf 35:175–197

  Article  Google Scholar 

• Shupp R, Williams AW (2008) Risk preference differentials of small groups and individuals. Econ J 118:258–283

  Article  Google Scholar 

• Sitkin SB, Weingart LR (1995) Determinants of risky decision-making behavior: a test of the mediating role of risk perceptions and propensity. Acad Manag J 38:1573–1592

  Google Scholar 

• Sprinkle GB, Williamson MG, Upton DR (2008) The effort and risk-taking effects of budget-based contracts. Account Organ Soc 33:436–452

  Article  Google Scholar 

• Sutter M (2007) Are teams prone to myopic loss aversion? An experimental study on individual versus team investment behavior. Econ Lett 97:128–132

  Article  Google Scholar 

• Sutter M (2009) Individual behavior and group membership: comment. Am Econ Rev 99:2247–2257

  Article  Google Scholar 

• Towry KL (2003) Control in a teamwork environment: the impact of social ties on the effectiveness of mutual monitoring contracts. Account Rev 78:1069–1095

  Article  Google Scholar 

• Yechiam E, Druyan M, Ert E (2008) Observing others’ behavior and risk-taking in decisions from experience. Judgm Decis Mak 3:493–500

  Google Scholar 

• Zhang Y (2008) The effects of perceived fairness and communication on honesty and collusion in a multi-agent setting. Account Rev 83:1125–1146

  Article  Google Scholar 

• Zhang J, Casari M (2012) How groups reach agreement in risk choices: an experiment. Econ Inq 50:502–515

  Article  Google Scholar 

Page 2

From: The influence of compensation interdependence on risk-taking: the role of mutual monitoring

Panel A: Descriptive statistics per treatment and round (mean [standard deviation])   Compensation interdependence (CI)a Absent Present Total Mutual monitoringb Mutual monitoring Absent Present Absent Present

Number of subjects (n)	29	28	27	27	111
High risk-taking (in Lira)c
Round 1 d	326.79 [205.46]	291.93 [199.88]	295.07 [184.92]	331.26 [195.90]	311.37 [195.00]
Round 2	309.55 [230.64]	260.82 [205.03]	289.63 [190.62]	368.52 [273.32]	306.76 [227.27]
Round 3	303.86 [236.49]	208.96 [180.25]	235.85 [145.69]	358.63 [221.48]	276.70 [205.53]
Round 4	239.90 [212.14]	180.18 [154.77]	206.85 [151.66]	255.59 [190.67]	220.61 [179.52]
Round 5	318.14 [273.32]	113.43 [124.80]	235.85 [181.21]	324.07 [206.83]	247.93 [219.26]
Round 6	238.07 [231.14]	154.86 [163.91]	223.00 [196.64]	225.26 [169.18]	210.30 [192.82]
Round 7	248.97 [259.55]	123.46 [125.28]	257.85 [280.25]	215.33 [179.46]	211.29 [223.72]
Round 8	296.62 [284.80]	168.11 [142.64]	252.78 [254.81]	339.33 [278.40]	263.93 [251.70]
Round 9	308.45 [252.83]	163.68 [134.98]	224.00 [225.89]	231.00 [188.24]	232.55 [209.58]
Round 10	214.41 [211.72]	161.50 [125.31]	196.52 [210.39]	289.07 [253.30]	214.87 [207.49]
Total high risk-taking (in Lira)	2,804.76 [1,702.72]	1,826.93 [1,216.90]	2,417.41 [1,606.15]	2,938.07 [1,416.64]	2,496.31 [1,540.83]

Panel B: Descriptive statistics (all rounds) by treatment (mean [standard deviation])   Compensation interdependence Absent Present Total

Mutual monitoring
Absent	2,804.76 [1,702.72]	2,417.41 [1,606.15]	2,618.00 [1,653.37]
Present	1,826.93 [1,216.90]	2,938.07 [1,416.64]	2,372.40 [1,421.61]
Total	2,324.42 [1,551.40]	2,677.74 [1,522.85]	2,496.31 [1,540.83]

1. aIn the presence of compensation interdependence (CI), subjects’ variable compensation is calculated as the sum of the financial returns of five peers sitting in a row equally divided between the peers for each participant. In the absence of compensation interdependence, participants’ variable compensation stems from the financial return from their investment. Compensation interdependence is a between-subjects factor
2. bIn the presence of mutual monitoring, subjects are shown the amounts allocated onto the investment alternatives by themselves and their four peers in the preceding round. In the absence of mutual monitoring, subjects only see their own invested amounts. Mutual monitoring is a between-subjects factor
3. cHigh risk-taking is the dependent variable and measures the amount invested in the investment alternative H containing higher risk (in the experimental currency “Lira”, 65 Lira/€)
4. dRound is a within-subjects factor. In every round, subjects need to make one investment decision