Vladimir Vladimirov's paper 'Worker Runs' has been published in The Journal of Finance
The paper 'Worker Runs' by Research Fellow Vladimir Vladimirov (University of Amsterdam), and Florian Hoffmann (KU Leuven, Belgium) has been published in The Journal of Finance. The focus of the paper is that the departure of hard-to-replace skilled employees can be contagious, but optimal compensation design can mitigate this problem.
Abstract
The voluntary departure of hard-to-replace skilled workers worsens firm prospects, which can lead to additional departures. We develop a model in which firms design compensation to limit the risk of such “worker runs.” To achieve cost-efficient retention, firms combine fixed wages with dilutable compensation—such as vesting equity or bonus pools—which pays remaining workers more when others leave but gets diluted otherwise. Compensating (identical) workers with differently structured compensation, that is, with a different mix of output-dependent and output-independent pay, can further mitigate the risk of worker runs by ensuring a critical retention level in a cost-efficient way.
Article citation
Florian Hoffmann, Florian and Vladimir Vladimirov, 'Worker Runs', The Journal of Finance, Vol. 80, Issue 2, pp. 937–979, doi.org/10.1111/jofi.13424