The effect of cash versus equity compensation on audit committee decision-making - evidence from the 2007 Deloitte censure

Purpose This study aims to investigate the effect of cash versus equity compensation on audit committee decision-making after the Public Companies Oversight Board’s 2007 censure of Deloitte. Design/methodology/approach Using a sample of 2,588 firms, this paper uses two different compensation measurements to empirically examine the effect of audit committee compensation on decision-making. Findings The authors find that audit committee compensation effects the post-censure decision-making of Deloitte’s clients. The results support the hypothesis that cash compensation paid to audit committees influences audit committee members to retain their auditors post-censure. Additionally, there is some evidence to support the hypothesis that equity compensation increases the propensity to switch auditors post-censure. Practical implications This study will be of interest to regulators, policymakers and researchers as it provides further evidence in the area of audit committee decision-making and the effect of cash and stock compensation paid to audit committee members. Originality/value This study provides empirical evidence of the association between audit committee compensation and audit committee decision-making by investigating the effect of cash-based compensation and stock-based compensation on audit committee decision-making.

Analyzing decision records from committees

In the absence of a complete voting record, decision records are an important data source to analyze committee decision-making in various institutions. Despite the ubiquity of decision records, we know surprisingly little about how to analyze them. This paper highlights the costs in terms of bias, inefficiency, or inestimable effects when using decision instead of voting records and introduces a Bayesian structural model for the analysis of decision-record data. I construct an exact likelihood function that can be tailored to many institutional contexts, discuss identification, and present a Gibbs sampler on the data-augmented posterior density. I illustrate the application of the model using data from US state supreme court abortion decisions and UN Security Council deployment decisions.

Prosociality in Majority Decisions: A Laboratory Experiment on the Robustness of the Uncovered Set

Social choice theory demonstrates that majority rule is generically indeterminate. However, from an empirical perspective, large and arbitrary policy shifts are rare events in politics. The uncovered set (UCS) is the dominant preference-based explanation for the apparent empirical predictability of majority rule in multiple dimensions. Its underlying logic assumes that voters act strategically, considering the ultimate consequences of their actions. I argue that all empirical applications of the UCS rest on an incomplete behavioral model assuming purely egoistically motivated individuals. Beyond material self-interest, prosocial motivations offer an additional factor to explain the outcomes of majority rule. I test my claim in a series of committee decision-making experiments in which I systematically vary the fairness properties of the policy space while keeping the location of the UCS constant. The experimental results overwhelmingly support the prosociality explanation.

New Zealand Reserve Bank Reform

The inflation-targeting approach to central banking was invented in New Zealand, before becoming the global standard during the 1990s. Despite this popularity, significant reforms were introduced to the Reserve Bank Act in late 2018 as part of a two-stage review, notably an expanded mandate and a committee decision-making structure. This article reviews the changes in the light of global and domestic challenges to central banking emerging since the global financial crisis.

How Transparency Kills Information Aggregation: Theory and Experiment

We investigate the potential of transparency to influence committee decision-making. We present a model in which career concerned committee members receive private information of different type-dependent accuracy, deliberate, and vote. We study three levels of transparency under which career concerns are predicted to affect behavior differently and test the model's key predictions in a laboratory experiment. The model's predictions are largely borne out—transparency negatively affects information aggregation at the deliberation and voting stages, leading to sharply different committee error rates than under secrecy. This occurs despite subjects revealing more information under transparency than theory predicts. (JEL C92, D72, D82, D83)

OP29 The Impact Of Individual Patient Input; Strengthening The Evidence

Introduction:The National Institute of Health and Care Excellence (NICE) assesses the efficacy and safety of interventional procedures for use in the National Health Service (NHS). Since 2006, NICE's Public Involvement Programme (PIP) has obtained ‘patient commentary’ to inform committee decisions, using a questionnaire asking patients about their experience of the procedure including benefits, disadvantages and side effects. Commentary is considered by the committee alongside other evidence. The PIP has piloted a project to: capture the impact of the patient commentary on the committee's decision-making; explore patterns of impact; and identify criteria that indicate when patient commentary may not be required.Methods:The pilot included all interventional procedures guidance started between February 2016 and February 2017. Committee members’ views were captured using a form completed whenever patient commentary was considered. Responses were anonymized, entered into an electronic system, analyzed, and correlated against ‘committee comments’ in the published guidance. After twelve months, there was an unrepresentatively narrow spread of conditions, and most topics were updating previously published guidance rather than novel topics. The pilot was therefore extended by six months.Results:Patient commentary commonly had an impact on decision-making; however, no discernible patterns have yet been identified, nor criteria for when it may not be required. Key findings were: (i) patient commentary is equally useful for guidance updates as novel guidance, and (ii) interpretation and assessment of ‘impact’ varied across committee members but the majority agreed it reinforced the other evidence.Conclusions:Patient commentary has a measurable impact on committee decision-making. Very occasionally it provides new evidence and routinely provides reassurance that the published evidence is substantiated by real-world patient opinion. Measuring the impact of commentary seems to have raised its profile, with more committee comments about patient issues included in guidance during the pilot than in preceding years. The project needs to be extended to identify which procedures are least likely to benefit from patient commentary and why.