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When the Boss is far away and there is shared pay: The effect of monitoring distance and compensation interdependence on performance misreporting

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  • Lill, Jeremy B.

Abstract

This study examines the joint effect that probabilistic reviews and compensation interdependence have on misreporting. These two controls are often found in distributed work settings where employees have opportunity to misreport. In an experiment that holds the true detection rate equal, I find participants perceive a probabilistic review to be more effective (i.e., more likely to detect misreporting) when there is low versus high monitoring distance between a supervisor and employee. I also find low monitoring distance reduces misreporting when compensation interdependence is low. However, high compensation interdependence attenuates the effect of monitoring distance on misreporting. This suggests that, with respect to misreporting, probabilistic reviews and compensation interdependence are substitutes rather than complements within a control system. My study advances academics’ knowledge of this complex relationship and highlights the need for managers to consider this relationship when designing both control and compensation systems.

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  • Lill, Jeremy B., 2020. "When the Boss is far away and there is shared pay: The effect of monitoring distance and compensation interdependence on performance misreporting," Accounting, Organizations and Society, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:aosoci:v:86:y:2020:i:c:s0361368218301880
    DOI: 10.1016/j.aos.2020.101143
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    1. Felix Bolduan & Ivo Schedlinsky & Friedrich Sommer, 2021. "The influence of compensation interdependence on risk-taking: the role of mutual monitoring," Journal of Business Economics, Springer, vol. 91(8), pages 1125-1148, October.
    2. Bedford, David S., 2020. "Conceptual and empirical issues in understanding management control combinations," Accounting, Organizations and Society, Elsevier, vol. 86(C).
    3. Konstantin Flassak & Julia Haag & Christian Hofmann & Christopher Lechner & Nina Schwaiger & Rafael Zacherl, 2023. "Working from home and management controls," Journal of Business Economics, Springer, vol. 93(1), pages 193-228, January.
    4. Choi, Jongwoon (Willie), 2020. "Studying “and”: A perspective on studying the interdependence between management control practices," Accounting, Organizations and Society, Elsevier, vol. 86(C).
    5. Joseph A. Johnson & Patrick R. Martin & Bryan Stikeleather & Donald Young, 2022. "Investigating the Interactive Effects of Prosocial Actions, Construal, and Moral Identity on the Extent of Employee Reporting Dishonesty," Journal of Business Ethics, Springer, vol. 181(3), pages 721-743, December.

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