Congratulations to Seung Hwan (Peter) Oh, Assistant Professor in Accounting, who has been awarded the 2022-2023 FRQSC New Academics Grant (Soutien à la recherche pour la relève professorale) for his project titled “How Do You Want to Evaluate Your CEO? The Role of Subjective Evaluation when Objective Indicators Malfunction” (“Comment souhaitez-vous évaluer votre chef de la direction? Rôle de l’évaluation subjective en présence d’indicateurs objectifs inefficaces”).
How to appropriately compensate Chief Executive Officers based on accurate evaluation of their annual performance has always been one of the central issues in real-world practice and academic research. Given that the Board of Directors has to rely either (or both) on (1) key objective indicators (such as the firm’s annual earnings and cash flow) or (2) subjective judgments when finalizing the CEOs’ pay packages, having the proper intuition on the role of objective indicators and subjective judgement is crucial in understanding the companies’ performance evaluation schemes. Accordingly, Professor Oh will collect comprehensive information regarding CEOs’ subjective performance evaluation criteria disclosed in legal filings of public companies and examine whether the Board of Directors are more (or less) likely to implement subjective judgement based on non-financial indicators when evaluating their CEO’s performance for annual incentive awards if objective summary indicators such as accounting earnings fails to reflect the inherent changes in firm value.