Focusing on a sample of U.S. retailers, I study the management control systems (MCS) that firms introduce when they first invest in controls, and identify four categories of initial MCS, which are defined in terms of the purposes these MCS fulfill. The first category, “Basic MCS,” is adopted to collect information for planning, setting standards, and establishing the basic operations of the firm. The other three categories are contingent on more specific purposes: “Cost MCS” focus on enhancing operating efficiencies and minimizing costs; “Revenue MCS” are introduced to foster growth and be responsive to customers; and “Risk MCS” focus on reducing risks and protecting asset integrity. I hypothesize and find that the choice among these categories reflects the firms' strategy, and that firms that choose initial MCS better suited to their strategy perform better than others.

Executive compensation consultants face potential conflicts of interest that can lead to higher recommended levels of CEO pay, including the desires to “cross-sell” services and to secure “repeat business.” We find evidence in both the US and Canada that CEO pay is higher in companies where the consultant provides other services, and that pay is higher in Canadian firms when the fees paid to consultants for other services are large relative to the fees for executive-compensation services. Contrary to expectations, we find that pay is higher in US firms where the consultant works for the board rather than for management.

In this study, we examine whether, for a sample of retail chains, high levels of employee compensation can deter employee theft, an increasingly common type of fraudulent behavior. Specifically, we examine the extent to which relative wages (i.e., employee wages relative to the wages paid to comparable employees in competing stores) affect employee theft as measured by inventory shrinkage and cash shortage. Using two store‐level data sets from the convenience store industry, we find that relative wages are negatively associated with employee theft after we control for each store's employee characteristics, monitoring environment, and socio‐economic environment. Moreover, we find that relatively higher wages also promote social norms such that coworkers are less (more) likely to collude to steal inventory from their company when relative wages are higher (lower). Our research contributes to an emerging literature in management control that explores the effect of efficiency wages on employee behavior and social norms.

We examine the economic consequences of more than 150 shareholder proposals to expense employee stock options (ESO) submitted during the proxy seasons of 2003 and 2004, the first case in which the SEC allowed a shareholder vote on an accounting matter. Our results indicate that these proposals affected accounting and compensation choices. Specifically, (1) targeted firms were more likely to adopt ESO expensing relative to a control sample of S&P 500 firms, (2) among targeted firms, the likelihood of adoption increased in the degree of voting support for the proposal, and (3) non-targeted firms were more likely to adopt ESO expensing when a peer firm was targeted. Additionally, (1) CEO pay decreased in firms in which the proposal was approved relative to a control sample of S&P 500 firms, and (2) among targeted firms, approval of the proposal was associated with decreases in CEO compensation and the use of ESO in CEO pay. Our findings reveal an increasing influence of shareholder proposals on governance practices.