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Fishing for excuses and performance evaluation

Author

Listed:
  • François Larmande

    (EM - EMLyon Business School)

  • Jean-Pierre Ponssard

Abstract

We study a principal–agent model in which the agent can provide ex post additional relevant information regarding his performance. In particular, he can provide a legitimate excuse, that is, evidence that a poor result is only due to factors outside his control. However, building a convincing case requires time, time that is not spent on exerting productive effort and thus generating information represents an opportunity cost. We obtain necessary and sufficient conditions for the principal to prefer a policy of adjusting ex post the performance measure for the information provided by the agent to a policy of conforming to a result-based system with no adjustments. The risk aversion and a possible limited liability of the agent play an important role in the analysis. This paper clarifies the issues associated with the so-called "excuse culture" prevailing in some organizations.

Suggested Citation

  • François Larmande & Jean-Pierre Ponssard, 2014. "Fishing for excuses and performance evaluation," Post-Print hal-02313124, HAL.
    • Handle: RePEc:hal:journl:hal-02313124
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    Cited by:

    1. Jonathan Glover & Carolyn B. Levine, 2019. "Information Asymmetries about Measurement Quality," Contemporary Accounting Research, John Wiley & Sons, vol. 36(1), pages 50-71, March.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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