Every spring DISCOVER: Marquette University Research and Scholarship showcases some of the most interesting research happening on Marquette's campus. Learn more through the links below.
POKING HOLES IN THE GOLDEN PARACHUTE Protesters in the so-called Occupy Wall Street movement took to the streets of lower Manhattan in 2011, in part to lambast corporate CEOs for purported greed. Their argument: These chief executives are overpaid, blessed with “golden parachute” clauses and devoid of transparency. Dr. Qianhua “Q” Ling, assistant professor of accounting at Marquette, has been studying the interplay among CEO severance packages, salary and transparency. And her findings could help shape how corporate boards approach these compensation and governance issues. In a paper slated to be published in 2012 by the Journal of Accounting, Auditing and Finance, Ling examines the association between pre-negotiated (or ex ante) severance agreements and the timely disclosure of bad news to governing boards and shareholders. She looked at “singletrigger” and “double-trigger” severance packages. According to Ling, the former entitles a CEO to compensation if employment is terminated without cause or the CEO resigns with good reason. The doubletrigger, or golden parachute, package occurs within a certain period of time after the sale or acquisition of a company. The executive receives compensation for the same reasons outlined above. “Those ‘causes’ or ‘reasons’ are different from company to company and often poorly defined,” Ling says. “The perception, and often the reality, is the CEO benefits greatly from these agreements.” Ling’s research found that CEOs who have single-trigger severance packages are more prone to conservative financial reporting and they tend to disclose bad news sooner. From the boards’ perspective, Ling says, this is the silver lining of having a severance agreement. “This association remains positive in the CEO’s last year of tenure where performance is poor,” she adds. “And the association is stronger among CEOs with a highly variable pay structure.” Ling suggests that if boards want to capitalize on the impact severance agreements have on the early disclosure of bad news, they should pair a singletrigger severance agreement with a highly variable CEO pay structure. In view of the very public criticisms of CEO compensation, severance and transparency, these findings highlight important strategies that corporate boards can use to more ethically guide their organizations, Ling says. “Quite simply,” she says, “I’m interested in how governance affects information and how information affects decisions.” Ling’s next project is no exception. She’s now examining the link between chief executive compensation and financial performance of nonprofit human services organizations. — CS ENGINEERING SAFER ROADS There are more than 11,000 miles of state roads in Wisconsin, and Dr. Alex Drakopoulos has studied all of them. It’s all part of the research the associate professor of civil, construction and environmental engineering has guided during his 19-plus years at Marquette, hoping his findings help federal and state transportation agencies implement safety changes for roads. His latest work includes a federal grant to analyze the effect of trucks on congestion. “A truck accelerates much slower than a passenger car. So as the speeds drop when you have congestion — perhaps it’s a work zone or peak-hour traffic — you’re going to have the trucks create a lot of gaps ahead of them,” he says. “This certainly is going to impact congestion.” And when there’s congestion, there’s driver frustration. When there’s driver frustration, there are accidents. Drakopoulos hopes his data will provide new information about how to make congested highways that carry a lot of trucks operate more safely and efficiently. Drakopoulos also conducted research on the national standards that govern traffic signal indications and road markings. Results from this research, with additional findings from other investigators, are now included in the Manual on Uniform Traffic Control Devices, a publication that sets nationwide standards for traffic agencies. Another one of his projects was the first U.S. installation of special pavement markings that were used in Japan to slow down drivers before dangerous turns. These markings, installed by special permission from the Federal Highway Administration at a Milwaukee freeway location, are now widely used across the country. Even though he says his research “focuses on things that people don’t ordinarily notice on a daily basis” — a blinking red light bulb in a traffic signal or lines etched on the pavement surface, for instance — he knows small findings can mean big change. “If you have the chance to improve policy because of your findings, it is a great help to people who need it,” Drakopoulos says. — BDJ Marquette University 23