Knowledge at Wharton

Compensation for American CEOs has soared over the past decade far exceeding inflation and wage gains of ordinary workers -- and leading critics to charge that self-serving insiders have tilted the playing field at shareholders’ expense. In response the Securities and Exchange Commission on January 17 took the first step toward adopting rules to better show shareholders how much their top executives and directors are paid. Will that drive executive pay down? Probably not say several Wharton professors arguing that executive pay is not necessarily as excessive as the most extreme cases suggest. Still they agree that more complete disclosure would improve the system. As one expert puts it: ”When people are forced to undress in public they pay attention to their figures.”

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Walt Disney announced yesterday that it is acquiring Pixar the animated film studio that has made such hits as The Incredibles Finding Nemo and Toy Story. As part of the $7.4 billion deal Pixar’s founder Steve Jobs will become a Disney board member and also its biggest shareholder. In an audio-only interview Wharton marketing professor Peter Fader speaks with Mukul Pandya editor-in-chief of Knowledge at Wharton and Robbie Shell editorial director about the implications of this deal not just for the two companies involved but for the whole media and entertainment industry.

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China’s securities industry is just one of the sectors moving ahead at a dizzying pace as the country readies itself for full entry into the World Trade Organization this year according to participants in the recent Wharton Global Business Forum’s Asia Conference. Not surprisingly China dominated discussion at the conference with many speakers noting the speed with which the country is advancing. But growth is not just confined to China. The 21st century said one panelist will be the ”Asian century ” powered by among other things a highly educated and motivated population and increased travel and tourism.

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Big media players are accustomed to watching the ratings for the most popular music video and book content but perhaps they should pay more attention to how consumers feel about three letters at the bottom of most charts -- DRM which stands for digital rights management. Broadly defined DRM encompasses multiple technologies that control the use of software music movies or any other piece of digital content. But media companies are risking a consumer backlash by deploying overzealous systems with draconian restrictions say experts at Wharton who also question whether DRM is worth the effort whether it will survive and what the best approach is for balancing the rights of consumers with the rights of content creators.

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IBM. Verizon. Sears. Hewlett-Packard. Motorola. The list of corporations that have put a halt to guaranteed pension plans comes as a jolt to Baby Boom employees entering what they thought would be their peak pension-building years. At the same time new accounting rules and Congressional legislation are being drafted to close the U.S. pension-funding gap now estimated at $450 billion. While some proposals under discussion could make it easier for companies to discontinue defined-benefit plans others would create incentives to support defined-contribution programs such as 401(k) plans according to Wharton faculty and pension experts. Amid all this flux they add one thing seems certain: Pension plans have become risky business.

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Although it has one of the most dynamic economies in Africa Botswana also has one of the world’s highest known rates of HIV-AIDS infection. In response the Botswana government along with the Medical School of the University of Pennsylvania and Wharton’s Sol C. Snider Entrepreneurial Research Center is helping develop a more efficient system to manage and monitor HIV/AIDS therapy. According to Ian C. MacMillan director of the Snider Center and James D. Thompson associate director of Wharton Entrepreneurial Programs the Botswana project illustrates a new concept called ”Societal Wealth Creation via Experimental Entrepreneurship.” By working to develop societal wealth enterprises in places like Africa MacMillan and Thompson hope to sidestep two obstacles that often plague business development around social problems -- low profitability and lack of seed funding.

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When the door to a TLA Entertainment video store swings open the primary question facing most consumers shuffling inside is relatively simple: ”What movie will I take home tonight?” But to Wharton marketing professor Jehoshua Eliashberg and Wharton doctoral candidate George Knox the key question surrounding the burgeoning $12 billion home-video market goes at least one step further: Which consumers will rent their movie of choice tonight and which consumers will buy? In a study entitled ”The Consumer’s Rent vs. Buy Decision: The Case of Home-Video ” Eliashberg and Knox present a new model that they say accurately predicts the consumer’s decision to rent or buy a particular movie at a video store.

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Would you like to go on an Internet auction site and know how much to bid for a certain item -- and also know that you didn’t overpay for that item? How about when you sell an item in an online auction: Would you like to know what price to set that ensures you don’t leave money on the online table? Wharton marketing and statistics professor Eric T. Bradlow can’t provide specific answers. But he does offer guidance on the behavior of potential buyers in a new study entitled ”An Integrated Model for Bidding Behavior in Internet Auctions: Whether Who When and How Much ” recently published in the Journal of Marketing Research. Bradlow co-authored the study with Cornell marketing professor Young-Hoon Park. ”To the best of our knowledge this is the first attempt to model formally the behavioral aspects of bidding behavior for the entire sequence of bids in Internet auctions ” the authors write.

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The chairman of the largest software house in Ghana spoke approvingly of the ”Wild West” aspects of doing business there. One of that country’s cabinet ministers saw signs that ”constitutional democracies are gaining roots” on the African continent. A prominent Nigerian lawyer spoke of profit margins all but impossible in the United States or Europe. These three panelists appeared recently at the 2005 Wharton Global Business Forum Africa Conference entitled ”Unveiling the Value; Demystifying the Risk.” Speakers described the continent as bursting with opportunities challenges and pitfalls for local and foreign companies but the emphasis was decidedly on the word ”opportunity.”

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It’s not easy being Wikipedia a free web encyclopedia created and edited by anonymous contributors. Just ask founder Jimmy Wales who has seen his creation come under fire in just a few short months as the site fends off vandalism and charges of inaccurate entries. But Wikipedia founded in 2001 as a non-profit organization has become a big enough presence that it raises a number of interesting questions including: Just how accurate is free content given recent events at Wikipedia? Does the aggregate ’wisdom of the crowd’ trump the expertise of knowledgeable individuals? Does Wikipedia’s policing mechanism work? And does the controversy over Wikipedia merely reflect further tension between old and new media? Wharton experts along with Wales offer some answers.

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