Summary: Incentive-based compensation often has both a negative and positive impact in today’s corporate environment. Corporate agents are often placed in difficult situations that can lead to conflict between making decisions that are in the best interest of one’s self, but not necessarily the best decisions for the company. Concepts of fairness and entitlement often impact behavioral finance decision making. This case serves as an illustrative example of how issues of overconfidence, fairness and entitlement can impact one’s decision making in our regulated financial markets.
Learning Objectives: After reading this case, students will be able to:
1. Evaluate how entitlement can impact decision making.
2. Gain an understanding of how overconfidence can impact decision making.
3. Learn how excessive optimism can impact decision making.