Business Commons^™

Executive Option Mix And Firm Litigation Risk, Andrew Cohen

CMC Senior Theses

Compensating executives with stock options creates incentives for executives and aligns their goals with shareholders. When examining specific components of equity-based compensation, stock options have a larger incentive effect on executives compared to stock awards as options are priced as a function of stock volatility. Since the option incentive effect is more profound than the stock incentive effect, executives may take on more risk. The relationship between firm risk and litigation can be demonstrated by the pricing of directors’ and officers’ liability insurance, which protects them from the costs of litigation. The purpose of this study is to examine the …

Case Study On The Impacts Of Covid-19 On Remote Work And Compensation In The San Francisco Bay Area, Carson Stubstad

CMC Senior Theses

COVID-19 has changed the way that organizations conduct business. Stay-at-home orders shifted many workers, who traditionally worked in-person, to remote work. Research has been done to understand the macro impacts and organization impacts of remote work, but very little research has been conducted on the impact of wages. This paper studies the effects of remote work during and after COVID-19 lockdowns on wages. This thesis uses the San Francisco Bay Area as a case study. The findings suggest that remote workers are being paid higher after the lockdown in the area. I analyze these trends by controlling for a variety …

An Analysis Of Impacts Of Covid-19 On Salary Cap Allocation And Performance In The National Football League, Abai Houser

CMC Senior Theses

Professional sports are one of the most successful industries in the world. The live spectacle and in-person nature make sporting events a unique and individual experience. COVID-19 shifted how athletic events were operated, financed, and viewed, thereby changing leagues as well. The National Football League was one of the last sports to start its season during 2019 and 2020, setting the stage as the only league to not isolate its players in a safe operating space. This paper studies the effects of COVID-19 on the salary cap management of teams after the pandemic. The findings suggest that financial metrics analyzed …

How A Supply Chain Stumble Changes A Company’S Policies And Progress 20 Years Later: A Case Study Of Gap Inc., Alexandra Futterman

CMC Senior Theses

Gap Inc. is the third-largest American retailer. Founded in 1969, Gap Inc. holds four brands, Gap, Banana Republic, Old Navy and Athleta. In the late 1990s and early 2000s Gap Inc. made headlines for child labor abuses along with many other large brands. After this negative attention, Gap Inc. began developing policies and practices to combat ethical supply chain issues. These policies included a Human Rights Policy, a Code of Vendor Conduct, working conditions standards, and even capacity building programs that boarded company reaches into communities they touch. In conjunction with the policies Gap Inc. has published several social responsibility …

Don’T Get Screwed: What Factors Determine The Inclusion Of J. Crew Blockers?, Michael Sill

CMC Senior Theses

A “J. Crew Maneuver” is a type of collateral-stripping event that transfers the value of a nearly insolvent company from the lender to the borrower. This concept matters to lenders because it exposes them to significant downside risk through the loss of hundreds of millions of pledged collateral. While credit analysts and debt lawyers have commented on the importance of preserving creditor value ex ante through lender-protective clauses embedded within debt documents, this paper breaks ground on empirically studying the determinants of these protective clauses known as “J. Crew Blockers”. I hypothesize that private equity backing, a contractionary credit environment, …

Are Nudges For Alternative Transit Persistent?, Mitchell J. Allan

CMC Senior Theses

The benefits of converting single-person drivers to alternative transit options are well-established. One option to accomplish this is for employers to provide alternative commute incentive programs. However, the research on the implementation of such programs is lacking. To provide a test, this research analyzes data obtained from a field experiment on daily alternative transit commute choices for a seven-month period. Participants are divided into four treatment groups in a two-by-two design for the first three-month period: incentives with either loss or gain framing, and messaging nudges with either the private or public benefits of alternative transit commute choices. The participants …

Fostering Transformational Leadership In Asian Americans: How To Reach The C-Suite, Khadija Ganijee

CMC Senior Theses

This paper investigates what has caused a lack of Asian American leadership in the corporate space and how transformational leadership can be the solution for these people by using their culture to their advantage. This was accomplished through a comprehensive review of transformational leadership and the personality traits associated with it, as well as psychological research on Asian American issues in the workplace and the role of Asian American culture. Stereotyping and discrimination play a role in the workplace, but usually, what a person can do to combat these issues is not explicated. This thesis aims to fill in that …

The Effectiveness Of Collaboration Within Supply Chain Management: A Case Study Of Adidas Group, Daniel Carr

CMC Senior Theses

For a multi-national company like Adidas, supply chain management is one of the most crucial aspects of business operations. Products cannot be sold unless Adidas’s supply chain is well-managed and efficient, and public perception of a brand/company is critical to success.

This case study analyzes the effectiveness of Adidas's distinct “collaborative approach” to supply chain management, which is characterized by not only monitoring and auditing suppliers, but also training them to make Adidas’s standards their own and approaching suppliers with the intention of building long-term relationships where the suppliers can become self-sufficient.

This study reviews the structure of Adidas's supply …

Are Women Executives Hurting Firm Performance? An Examination Of Gender Diversity On Firm Risk, Performance, And Executive Compensation, Krystal Diane Sung

CMC Senior Theses

In order to assess the continuing imbalance of top executives between genders, I examine the effects of gender diversity within top management teams on firm risk, performance, and executive compensation. Capitalizing on previous analysis, I apply three unique differentiators. First, I utilize current data from 2012 to 2017 from Compustat, CRSP, and ExecuComp. Second, I provide a unique subset view on a firm and individual performance of female CEOs to examine executive compensation. Third, my scope of analysis expands to S&P Composite 1500 companies. I use separate models to estimate the effect of gender diversity on firm risk by examining …

Does Managerial Risk-Taking Incentive For R&D Investments Translate To Future Earnings?, Ha Yun Cho

CMC Senior Theses

The convex pay-off structure of executive stock options (ESO) incentivizes CEOs to increase their firm stock-return volatility, thereby increasing their wealth in option portfolio. In this paper, I address two research questions. I first test if this managerial incentive induces executives to take on more risky projects in R&D that increases stock- return volatility, hence, boosting their personal wealth. I derive vega to measure managerial incentive, and vega is a dollar change in ESO for a 0.01 change in stock- return volatility. I find that there is a positive and statistically significant relationship between vega and R&D investment, which suggests …

The Effects Of Positive And Negative Environmental Responsibility On Financial Performance, Anna Gurr

CMC Senior Theses

As environmental responsibility (ER) gains momentum in the corporate and stakeholder world, it is imperative to understand the relationship between ER and financial performance. While there is prior research looking at this relationship, this study provides further insight into the specific effects of negative and positive ER. In addition, it looks over the years 2008-2011 having implications for companies about the effects of their ER even through financial hardships. This study uses a widely respected corporate social responsibility database, in which ER scores were separated from. In this study, 287 firms in the S&P 500 are examined through times-series regression …

Optimize Your Fitness, Optimize Your Business: The Balanced Scorecard, Analysis And Application For The Crossfit Affiliate, Jordan G. Aronowitz

CMC Senior Theses

The Balanced Scorecard for the CrossFit Affiliate will provide unprepared or inexperienced managers with the necessary information to make informed operational decisions. The Balanced Scorecard incorporates financial data, customer satisfaction, internal operations, and future growth to create a series of cause-and-effect relationships that illustrate how decisions in one aspect of a business affect others. The Balanced Scorecard particularly benefits inexperienced managers leading small businesses. As overall small business growth increased, the boutique fitness industry expanded. The CrossFit brand rose in conjunction, but because corporate leaders insist on a hands-off licensing model, affiliate owners do not receive assistance from CrossFit corporate …

The Role Of Disruptive Innovation, Personality Characteristics, And Business Models On Entrepreneurial Success, Will Shannon

CMC Senior Theses

Disruptive Innovation, according to the term’s founder Clayton Christensen, is defined as a specific type of innovation that is able to capture the lower-end of the market through quality, feature, or cost differences and leverage this position to achieve higher market share. Entrepreneurs who utilize disruptive innovation strategies have been historically able to create products and services that achieve massive financial and cultural success. Theories of personality characteristics have been previously applied to entrepreneurial activities, but not used to bridge the gap between developmental experiences and market success. Cross-industry analysis of ten top entrepreneurial business leaders from retail, food services, …

The Effect Of Increased Regulation On Option Use Within The Information Technology Industry, Ahmed H. Eltamami

CMC Senior Theses

Exorbitant executive compensation packages have drawn large criticism from the public eye and with the recent financial crisis and the previous tech bubble opinion on executive incentives has forced government institutions to respond. Over the past two decades the SEC and FASB have aimed to respond to the public and with three large regulation changes in the 2000s, pay for performance compensation has gone through many changes. In this study I build on previous work in an attempt to answer whether or not executives within the Information Technology industry have seen a larger decline in option compensation when compared to …

Managing Environmental Risk In The Oil And Gas Industry, Haley Conner

CMC Senior Theses

Oil and gas industry operations place large pressures on the local environment and inhabitants. However, the continued rise in the demand for useable energy and resources has resulted in further production pressures for oil and gas companies. Meeting these demands comes with high risks and costs to both society and the environment. Oil and gas companies are thus faced with the challenge of meeting the world’s expanding energy demands while minimizing the negative externalities associated with these operations.

Many of the risks these corporations face are site specific, requiring detailed background research and precautionary measures that cannot be solved using …

Corporate Social Responsibility And Financial Performance In The Consumer And Nonconsumer Sectors, Lauren Allen

CMC Senior Theses

With corporate social responsibility (CSR) becoming more important to stakeholders and thus firms, understanding the relationship between CSR and corporate financial performance (CFP) is becoming more and more important. Although there is much research examining the general CSR-CFP relationship, there is very little, if any, research that investigates the CSR-CFP association across industries. With a sample of 429 firms from the S&P 500, my study looks to see if this association differs between the consumer and nonconsumer sectors. Time-series regression analyses reveal that while the CSR-sales relationship is negative for both consumer and nonconsumer companies, the CSR-gross profit association is …

Mergers & Abenomics: The Determinants Of M&A In Japan's New Economy, Ethan S. Hallberg

CMC Senior Theses

This paper investigates the influence of various macroeconomic variables on Japan’s merger and acquisition (M&A) activity, both in terms of total deal value and total number of deals. Looking at monthly data from June 1997 to December 2013, I use econometric time-series analysis to find that: First, total deal value per month is not well explained by our macroeconomic variables, but about half of the variation in number of deals per month can be explained by our dataset. Second, the most important determinant in the total number of deals per month during our period is the level of national debt, …

The Deadweight Loss Of Equity-Based Compensation, Jessica Pence

CMC Senior Theses

In order to maximize shareholder value, firms attempt to align the incentives of the executives with those of the shareholders by giving them equity as a portion of their compensation package. The terms associated with this equity compensation forces the executives to hold undiversified portfolios, resulting in a sizeable deadweight loss. This paper uses the formula developed by Meulbroek (2001)1 to calculate the dollar value of this deadweight loss, in order to quantify the costs associated with equity-based compensation. We find that the 56 executives in our data set have a combined deadweight loss of $70 billion, and that on …

Portfolio Company Selection Criteria: Accelerators Vs Venture Capitalists, Cody Chang

CMC Senior Theses

The explosive growth of ‘accelerators’ in the United States has given entrepreneurs and their startups the opportunity to pursue seed-stage financing. While the specific economic role of accelerators remains unclear, a study comparing the selection of portfolio companies between accelerators and venture capitalists was performed. A difference of means was performed on the responses per question between the collected 19 accelerators’ response and the 100 venture capitalists’ response, recorded from a prior study. It is found that venture capitalists place significantly more weight, than accelerators, on the potential of the startup’s product or service to be proprietary, to enter a …

Omni-Channel Retail And The New Age Consumer: An Empirical Analysis Of Direct-To-Consumer Channel Interaction In The Retail Industry, Alec J. Dorman

CMC Senior Theses

It is indisputable that the internet has become a necessary component of contemporary multi-channel retail, as more consumers are choosing to purchase goods online each year. As online spending continues to grow, many have called into question the future of brick-and-mortar retail. This thesis seeks to empirically prove that brick-and-mortar retail remains not only relevant, but indispensable in direct-to-consumer business models. The basis of this conjecture is the idea of channel synergism, in which online and brick-and-mortar operations are complementary. This theory is predicated on the emergence of the omni-channel retail, which is characterized by the integration of the various …

The Impact Of Prior Performance On Leadership Appointment In A Merger Of Equals, David A. Hirsch

CMC Senior Theses

Leadership appointment during mergers has a logical and established precedent when there is a clear target and acquirer. However, in the extraordinary case of Merger Of Equals (MOEs) – where this is relative equal ownership, board representation, earnings contribution etc - this process is much less defined and can often have serious consequences on the merger, both in closing negotiations as well as post-merger performance. Intuition assumes the better performing CEO should and will be appointed. In practice, however, that is often not the case. It is arguable that performance can be defined through objective means (financially & operationally), yet …

A Historical Review Of Five Of The Top Fast Food Restaurant Chains To Determine The Secrets Of Their Success, Alex Leon Lichtenberg

CMC Senior Theses

The primary goal of this paper is to critically examine five of the top nine US fast food chains to look at their history and to determine what factors have lead to their massive success. The companies that will be analyzed include: McDonald's, Taco Bell, Kentucky Fried Chicken, Domino's Pizza, and Subway. Similarities and differences of these companies are compared and contrasted throughout the paper and clearly demonstrate how each company has managed to capture and maintain major market share in their respective food categories. Areas that are examined range from product quality to to business models to consumer psychology. …

Weiser Carrots And Sticks: Motivation Beyond Money At The Shakedown Café, Julian A. Martinez

CMC Senior Theses

It is generally assumed that monetary incentivization is the most effective means of motivating organizationally-beneficial behaviors. Individuals, under this line of thought, pursue their own objective self-interest above all else. However, evidence is being uncovered that indicates that human motivation may be a much more complicated facet of the human psyche. The purpose of this study is to examine the deeper underpinnings that drive people work that might lie beyond financial rewards. In order to do this, the Shakedown Café, a student-run restaurant on Pitzer College’s campus, will be examined. This specific organization is of particular interest because it does …

Measuring The Impact Of A Comprehensive Health And Wellness Initiative, Patrick R. Rooney

CMC Senior Theses

As healthcare costs continue to rise across the country more companies are beginning to look for new strategies to cut costs. The evolving health and wellness industry has been shown to reduce expenditures from costly medical services by improving long term healthy behaviors in the work force, aiming to impact the demand and supply sides of healthcare. This paper looks at the history behind the health and wellness movement and specifically evaluates Healthy Incentives, King County's own health and wellness initiative and the impact such a program has on direct medical expenditures as well as key health risk factors that …

Take Me Out Of The Ball Game: The Efficacy Of Public Subsidies In The Success Of Professional Sports Stadiums, Jonah Chodosh

CMC Senior Theses

This paper weights the relative advantages of multiple factors that lead to the success of professional sports stadiums in major markets, though a discussion of the arguments for and against public subsidies towards these projects. Using a logit statistical model, the paper determines that the two factors determining the highest likelihood of venue success include multiple tenants and access to mass transit. The analysis demonstrates that public subsidies towards stadiums don’t generate sufficient economic returns, and that successful stadiums can be created without using taxpayer funds.

Determinants Of Corporate Cash Holdings, Yun Lai (William) Li

CMC Senior Theses

The paper explores the driving forces behind corporate cash holdings by analyzing past literature and extending this research to the behavior of firms after the 2008 recession. I look at the cash to assets and net debt to assets ratios from October 1980 to October 2011 to obtain an understanding of the past and current state of cash holdings. A comprehensive literature review is done on agency costs and transactional motives to give the reader an overview of the costs and benefits of holding cash. This provides the foundation for the precautionary motives for companies today to keep cash as …

The Next Catalyst For Change: How Corporate Shared Value Is Reshaping Capitalism, Emily Davenport

CMC Senior Theses

Both corporations and their global conglomerates are looking into the face of an evolving idea of capitalism. As businesses become more intertwined with society, this special relationship is becoming increasingly deterministic of the condition of the world. This paper explores the possibility that if businesses integrate shared value -- a way to combine economic and social value -- into their long-term business plans, that not only will society be better off, but the businesses themselves may be able to explore previously unrecognized potential for profits.

Public Dollar Private Owners; Tax Subsidies For New Stadiums In Professional Sports, Grant J. Bunnage

CMC Senior Theses

The growing popularity of North American professional sports over the last twenty years directly coincides with the recent trend of urban communities using tax dollars to publically subsidize professional football, baseball, and basketball stadiums. Communities across North America invest substantial amount of public tax dollars in private facilities in light of a consensus among policy analysts that the economic impact of the new stadium is greatly exaggerated. The economic impact of new stadiums has been extensively researched, the focus of this paper rather, is to examine the impact publically subsidized facilities built in the last twenty years have on the …

The Relationship Between Competitive Balance And Revenue In America's Two Largest Sports Leagues, Matt D. Pautler

CMC Senior Theses

This paper looks at the impact that competitive balance has on team revenues. The hypothesis that this paper is operating under is that higher levels of competitive balance will lead to higher levels of revenue. Two different measures of competitive balance will be used and regressions will be run to investigate whether high levels of the competitive balance measure are associated with high levels of revenue. The results of the data indicated that over all three time horizons (ten year, five year, and two year), high levels of variability in playoff appearances were associated with high revenue for Major League …