The good, the bad, and the ugly of corporate incentives

Imagine you were asked to play a game with half the pieces missing. Now imagine that all those pieces went to the other team. According to visiting assistant professor Hansol Jang, that’s often what happens in the corporate world when tax policies are designed to benefit a particular group.

“Regulation is almost always set up to do something very specific, but my research currently focuses on things that could be happening that were unintended,” said Jang. In a recent study conducted with two other current and former Gies professors, for example, he found that when tax cuts benefit select firms, the beneficiaries often use those dollars to compete with the peers who didn’t receive them. In other words, says Jang, the losers lose again.

Some incentives do work, according to Jang, like performance-based compensation that encourages CEOs to make bold moves. “Often executives are compensated on some kind of accounting measure like earnings per share. When companies do that, however, they usually exclude certain things,” he explained. “For example, if they went through a huge investment project, they don’t consider that investment as an expense. So, executives are still incentivized to take big expenses during the year so they can move forward.” Jang recently examined those exceptions, from the cost of mergers and acquisitions to the price of general corporate restructuring, and found that excluding them from the bottom line had a positive effect. Executives were incentivized to take risks and shareholders reaped the rewards, providing the perfect win/win.

Those are the kinds of insights that Jang hopes to bring to the classroom as part of Gies’ world-renowned accounting faculty. It’s a setting that should seem very familiar to Jang, who completed his bachelor’s, master’s, and PhD at Gies. For Jang, there were many reasons to stay. It starts with Gies’ exceptional accounting faculty, which are ranked No. 1 in the nation by the BYU Faculty Research Rankings.

“I’ve met a lot of people, especially during my PhD years, and really the faculty members at Gies are probably the best I’ve ever worked with. And it’s not only at the professional level. I just like interacting with faculty members at Gies.”

Now that he’s joining their ranks, he looks forward to putting his stamp on a program that’s been a major part of his life. For him, that means really helping students to see the big picture in classes like Accounting Measurement and Disclosure, which he’ll be leading. “It’s not just accounting that they should be aware of, but how accounting is related to other fields,” said Jang.

It also means more broadly equipping students with the skills they need to excel regardless of the path their career takes. “Accounting students don’t have to be accounting professionals after graduation,” he said. “You can also be something else if you know that something else exists.” That why students at Gies are exposed to a broad range of transformative learning experiences that acquaint them with core fundamentals of business as well as the cutting edge.

“I think Gies is doing a very good job of that,” said Jang. “They’re going full speed on the integration of data analytics and machine learning, along with exceptional curriculum they’ve always had.” It’s a winning formula that’s helping Gies create a generation of leaders who are doing “business on purpose.” This fall, he’ll become one of the professors helping make that happen. And for Hansol Jang, knowing that is all the incentive he needs.