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The authors investigate what determines differences in change in pay between men and women executives who move to new employers. Using proprietary data of 2,034 executive placements from a global search firm, the authors observe narrower pay differences between men and women after job moves. The unconditional gap shrinks from 21.5% in the prior employer to 15% in the new employer. After controlling for typical explanatory factors, the residual gap falls by almost 30%, from 8.5% at the prior employer to 6.1% in the new placement. This change reflects a relative increase in performance-based compensation for women and a lower level of unexplained pay inequality generally in external placements. Controlling for individual fixed effects, observed women have higher pay raises than do men. Finally, the authors find suggestive evidence that pay differences may also be moderated by differences in the supply and demand for women executives. [ABSTRACT FROM AUTHOR]

The authors assert that broad-based stock options create a social exchange relationship between the employer and employees, leading to higher individual job performance in the next period. They compare this social exchange hypothesis to the more typical incentive-based explanation for stock options, which is that holding options generates financial incentives for better individual job performance in the current period. Findings show that significant and meaningful relationships are associated with social exchange effects and that these are both independent of incentive effects and arguably greater than those for the incentive effects. The authors use non-parametric and parametric fixed effects models, other controls for sample heterogeneity, and alternative specifications to address possible concerns about identification and endogeneity. These results extend empirical studies of social exchange relationships to common workplace practices. They also raise the possibility that some of the performance effects attributed to incentives in other studies may actually be attributable to social exchange effects. [ABSTRACT FROM AUTHOR]

In this article, the author studies the strategic interaction between employee stakeholders, in particular labor unions, and top management, and he evaluates the effect of the two parties' inherent competitive rent-seeking behavior on CEO pay. Using a panel of firms listed on the S&P/TSX Composite Index, the author shows that CEO compensation withstood the financial crisis (2008-2011) despite lower and even negative corporate performance. Further, highly unionized companies were associated with higher CEO pay in terms of non-equity elements such as salary and pension allocations. The presence of unions had no observed effect in reducing bonuses, stock options, and restricted stock units. These findings have implications for the debate on income inequality and the power of unions to bring about change. [ABSTRACT FROM AUTHOR]

When politicians feel popular pressure to act, but are unwilling or unable to address the root cause of the problem, they resort to symbolic policymaking. In this paper, I examine excessive executive compensation as an issue that rose to the top of the political agenda during both the Great Depression and the Great Recession. Presidential candidates, members of Congress, the media, and the public alike blamed corporate greed for the economic downturn. In both instances, however, enacted legislation stopped short of changing the way in which executive pay was determined or placing effective, enforceable limits on it. I analyze the nature of the democratic process and contend that public policy scholars need to pay more attention to the occurrence of symbolic policies. The category of symbolic policies offers a more accurate approach to understanding the politics of executive compensation in the United States during the two crises and helps explain why, in spite of the recent legislative efforts, it continues to rise. [ABSTRACT FROM PUBLISHER]

Michael Graham discusses changes in the executive compensation landscape over the past decade and makes the case that since the mid-2000s, the world has changed dramatically but executive compensation structures and approaches have not necessarily kept pace. Graham addresses the changes relating to business environment, regulations, stakeholders, vision, strategy, organizational capabilities and program components. He discusses how executive compensation approaches could be better structured to address relevant changes in these areas. [ABSTRACT FROM AUTHOR]

The author makes the case that the genesis of the problem surrounding CEO compensation is that many CEOs are not operating under a “fair and reasonable value exchange” with the organization that they lead and that there are very clear reasons why that is the case. He provides insights that help readers find new ways to view, consider and reframe approaches to CEO (and other executive) employment relationships consisting of compensation programs and contracts using the all-important concept of value exchange coupled with a principled approach, appropriate tools and well thought out processes. [ABSTRACT FROM AUTHOR]

Company stakeholders have varying degrees of interest and influence on executive pay actions. These are analyzed in terms of their relative importance on the pay elements and time periods beginning with 1900. The ratio of CEO pay to other workers is reviewed. The stakeholders include executives themselves, other employees, shareholders (and their representatives on the board of directors and compensation committee), company customers and suppliers, as well as the community (business press, governmental regulators and rule makers and shareholder watchdogs). [ABSTRACT FROM AUTHOR]

This study examines how firm performance influences CEO pay in U.K. public listed companies. Specifically, it explores evidence of relative performance evaluation, following the recommendation in the U.K. Combined Code on Corporate Governance to link executive pay to relative firm performance. Using a panel of CEOs drawn from 204 of the largest, nonfinancial U.K. companies, between 2003 and 2007, we provide new and convincing evidence that shows basic pay and annual bonus is determined relative to annual FTSE 350 market performance and long-term incentive payouts are determined relative to 3-year FTSE 350 industry sector performance. Our results provide robust evidence that is consistent with the principal-agent framework of executive pay and firm performance. We demonstrate that it is crucial for research to distinguish between the different elements of pay and the different performance conditions that attach to those elements in order to establish a comprehensive understanding of the pay-for-performance relationship. The study provides confirmation that remuneration committees consider own firm performance relative to peer group performance in setting up CEO compensation contracts. We conclude that changes introduced to improve corporate governance practice in the field of executive pay are working to the benefit of shareholders. [ABSTRACT FROM AUTHOR]

The impact of the five pay elements (salary, employee benefits, perquisites, short-term incentives and long-term incentives) on attracting, motivating and retaining executives is described along with the interest in stakeholders (especially shareholders) in each of the pay elements by time period (beginning with 1900). The level of pay is also analyzed in relation to level of effort and achievement, along with the personal qualities that define effective executives. [ABSTRACT FROM AUTHOR]

Despite substantial corporate governance and regulatory reform on both sides of the Atlantic, which started over two decades ago, executive pay remains an unresolved problem. Twenty years since the publication of the groundbreaking Cadbury Report, criticism of executive pay is more severe than ever before in the United Kingdom. The relationship between pay and performance is still highly questionable, and executive remuneration continues to vastly exceed and outpace average employee pay. In this article, we discuss and evaluate the U.K. coalition government’s attempts to influence practice, through the Hutton Review of Fair Pay and the latest revised U.K. remuneration reporting regulations. Although we welcome these changes, it is our view that regulation can only go so far in addressing executive pay and in creating a wider perception of fairness. Ultimately, individual remuneration committees must focus far more on managing internal relativities rather than on the external executive pay market, which as well as improving external perceptions is also more likely to increase levels of employee engagement and performance. [ABSTRACT FROM AUTHOR]

A large number of family firms employ nonfamily managers. This article analyzes the optimal compensation contracts of nonfamily managers employed by family firms using principal—agent analysis. The model shows that the contracts should have low incentive levels in terms of short-term performance measures. This finding is moderated by nonfamily managers’ responsiveness to incentives, their level of risk aversion, and measurement errors of effort related to short-term performance. The model allows a comparison between the contracts of family and nonfamily managers. This comparison shows that the contracts of family managers should include relatively greater incentives in terms of short-term performance measures. A number of propositions regarding the compensation of nonfamily managers employed by family firms are formulated. The implications of the model for family business research and practice are discussed. [ABSTRACT FROM PUBLISHER]

The article reviews the article "Winner-Take-All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States" by Jacob S. Hacker and Paul Pierson, which appears in the June 1, 2010 issue of the journal "Politics & Society."

The Bailout Bill is Congress's most recent attempt at legislating executive pay. A look at the consequences of historical legislation shows that legislation often has the opposite effect than what was intended, and actually has increased executive compensation in certain cases instead of curbing it. This article discusses the long-term implications of the bailout bill provisions and how the current market atmosphere may change basic strategies in executive compensation. [ABSTRACT FROM AUTHOR]

This doctoral thesis examines the influence of relative performance and managerial incentives on corporate financial misrepresentation, and then tests the relationship between misrepresentation and subsequent operating performance, including the moderating effects of change in board composition and Chief Executive Officer (CEO) turnover. Using a hand-collected data set from several archival sources of company records, the study includes a combination of estimation techniques, including categorical dependent variable and fixed-effect methods, all conducted using a matched sample of misrepresenting and nonmisrepresenting firms. The author draws several important conclusions from the empirical analyses. First, CEO incentive pay and poor relative performance increase the likelihood of misrepresentation. Second, misrepresentation impairs subsequent operating performance, although this negative effect can be partially offset by CEO replacement and increased board independence. The study advances our academic understanding of corporate misconduct and contributes to academic theory across research literatures, including strategic management, organization theory, and business ethics. [ABSTRACT FROM AUTHOR]

This article begins with the 1980s and 1990s business and public policy issue about pay for performance, which set executive pay in the United Kingdom and the United States into a problematic about value creation. In this context, it is not the absolute level of rewards that is the main concern, but rather the ways in which pay is connected with corporate performance. The article reviews evidence on long-term trends in remuneration and corporate performance. While the empirics on the growth of CEO pay in the United Kingdom and United States over twenty years show rates of increase that result in ever widening gaps between executive and average pay, the data on performance suggest that such pay increases have significantly outrun any sustained increase in value attributable to management effort. The article therefore argues that executive pay in giant corporations needs to be set in a new problematic of value skimming, which allows small elite groups to enrich themselves in ways that do not directly impoverish larger groups of shareholders or workers. [ABSTRACT FROM AUTHOR]