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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]

This article examines the concept of employee-based brand equity–the value that a brand provides to a firm through its effects on the attitudes and behaviors of its employees–and empirically demonstrates its significance on executive pay. Executives value being associated with strong brands and, therefore, accept substantially lower pay at firms that own strong brands. Consistent with identity theory, this effect is stronger for chief executive officers and younger executives than for other executives. Data from a large, cross-industry sample of executives suggest that academics and practitioners should take a broader view of the contributions of brand-related investments to firm value and make use of strong brands in pay negotiations that are typically viewed as being outside the realm of marketing. [ABSTRACT FROM AUTHOR]

This paper examines the crucial question of whether chief executive officer (CEO) power and corporate governance (CG) structure can moderate the pay-for-performance sensitivity (PPS) using a large up-to-date South African data-set. Our findings are threefold. First, when direct links between executive pay and performance are examined, we find a positive, but relatively small PPS. Second, our results show that in a context of concentrated ownership and weak board structures; the second-tier agency conflict (director monitoring power and opportunism) is stronger than the first-tier agency problem (CEO power and self-interest). Third, additional analysis suggests that CEO power and CG structure have a moderating effect on the PPS. Specifically, we find that the PPS is higher in firms with more reputable, founding and shareholding CEOs, higher ownership by directors and institutions, and independent nomination and remuneration committees, but lower in firms with larger boards, more powerful and long-tenured CEOs. Overall, our evidence sheds new important theoretical and empirical insights on explaining the PPS with specific focus on the predictions of the optimal contracting and managerial power hypotheses. The findings are generally robust across a raft of econometric models that control for different types of endogeneities, pay, and performance proxies. [ABSTRACT FROM AUTHOR]

Does the rise of the CFO as the second-ranked executive increase the status of the CEO? We find that, as a CFO becomes #2, a CEO receives higher pay in relative terms compared with other top executives. This result corresponds to the literature on span-of-control of executives in top management team. [ABSTRACT FROM AUTHOR]

The Netherlands adopted shareholders' say on pay over a decade ago. The general meeting of shareholders must approve the remuneration policy and any amendments to it. This Dutch approach offers fruitful insights into how say on pay works in practice. In the light of the recent European proposal to introduce a uniform say on pay, we examine the merits of the Dutch system. First, we describe the legal framework of the Dutch say on pay and its background. Then, using hand-collected voting data, information from the minutes of general meetings and ownership data for the entire Dutch say on pay period (2004-2014), we address and discuss both its direct and its indirect effects. Our study shows that, although remuneration proposals are seldom rejected, the influence of shareholders on the remuneration policy of the company is considerable. Furthermore, the Dutch approach to say on pay stimulates shareholders' dialogue and increases pressure on boards regarding remuneration matters, even in the presence of large insider shareholders. [ABSTRACT FROM AUTHOR]

Restatement disclosures have evolved into two basic categories: reissuances (Big ''R'') and revisions (little ''r''). A reissuance restatement requires an 8-K filing, whereas a revision restatement can be disclosed in less transparent ways. The high-transparency of a reissuance restatement disclosure (8-K) results in a greater likelihood of negative effects on companies, executives, and auditors (e.g., Plumlee and Yohn 2008; Burks 2010). Determining whether an 8-K filing is required involves judgment regarding materiality of the restatement, thus creating ambiguity as to the correct disclosure method. Such judgment also introduces the potential to opportunistically choose the method of disclosure. We study the restatement disclosure choices of companies to examine whether executive pay structure is associated with disclosure transparency. Using a sample of 1,178 restatements from the years 2004 through 2013, our results show that as the equity proportion of executive pay increases, the likelihood of a high-transparency disclosure decreases. However, as the difference in pay structure between the CEO and CFO increases, the likelihood of a high-transparency disclosure increases. Overall, our results suggest that executive pay structure influences disclosure choice and that pay structure differences between the CEO and CFO may mitigate such influence. [ABSTRACT FROM AUTHOR]

In this paper we examine the costs of seemingly excessive pay awards to CEOs within the UK FTSE 100 in the last decade and the consequent growth in executive pay inequality. In presenting this evidence we describe variations in the whole distribution of executive pay, rather than invoking some arbitrary cut-off point, to determine how changes in shareholder value match with concurrent changes in the distribution of executive pay. We ask whether the impact of executive pay inequality is a function of board size, rendering the CEO pay slice measure problematic in this context? We then question whether the interaction of board size and corporate performance, as measured by shareholder returns, explain variations in the sensitivity of the pay–performance relationship for UK FTSE 100 executives. We advance the Gini coefficient as a preferable measure of executive pay inequality in order to capture the impact of perceived inequality upon corporate performance. [ABSTRACT FROM PUBLISHER]

This paper examines how different types of interactions with U.S. markets by non-U.S. firms are associated with higher levels of CEO pay, greater emphasis on incentive-based compensation, and smaller pay gaps with U.S. firms. Using a sample of CEOs of UK firms and using both broad cross-sectional and narrow event-window tests, we find that capital market relationship in the form of a U.S. exchange listing is related to higher UK CEO pay; however, the effect is similar when UK firms have a listing in any foreign country, implying a foreign listing effect not unique to the United States. Product market relationships measured by the extent of sales in the United States by UK companies are associated with higher pay, greater use of U.S.-style pay arrangements, and a reduction in the U.S.--UK pay gap. The product market effect is incremental to the effect of a U.S. exchange listing, the extent of the firm's non-U.S. foreign market interactions, and the characteristics of the executive. The U.S.--UK CEO pay gap reduces in UK firms that make U.S. acquisitions. Furthermore, the firm's use of a U.S. compensation consultant increases the sensitivity of UK pay practices to U.S. product market relationships. [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]

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]

Manuscript Type: Empirical Research Question/Issue: The paper investigates the determinants of shareholder voting and its relation to CEO pay in the UK. The context of the study is the Directors' Remuneration Report (DRR) Regulations of 2002. This legislation gave shareholders a mandatory non-binding vote on boardroom pay in the UK. Research Findings/Insights: First, we find that less than 10 per cent of shareholders abstain or vote against the mandated Directors' Remuneration Report (DRR) resolution. This percentage is falling over time. Second, investors are more likely to vote against DRR resolutions compared to non-pay resolutions. Third, shareholders are more likely to vote against general executive pay resolutions, such as stock options, long-term incentive plans, and bonus resolutions compared to non-pay resolutions. Forth, firms with higher CEO pay attract greater voting dissent. Fifth, there is little evidence that CEO pay is lower in firms that previously experienced high levels of shareholder dissent. In addition, there is little evidence that the fraction of CEO equity pay, representing owner-manager alignment, is greater in such firms. Currently, we find limited evidence that, on average, “say on pay” materially alters the subsequent level and design of CEO compensation. Theoretical/Academic Implications: The study provides new insights on shareholder voting and CEO pay. Theoretically, shareholder voting is endogenously determined. Practitioner/Policy Implications: The study provides insights for practitioners and policy makers interested in shareholder rights, the effects on corporate governance, and say on pay in the UK. Shareholder voting appears to have limited effects on curbing excess CEO pay. Boards and compensation committees may want to communicate better policies on executive compensation to avert shareholder dissent. [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]

This study examines the implications that CEO age has onexecutive pay regarding data collected in a UK setting. Whereprior research has typically focused on total pay (salary plusbonus), this study offers a more complete conceptual model bysplitting pay into salary, annual bonus, and share options. Indoing so, we found that the relationship between CEO salaries andage are significantly related with this association weakeningover time. Another interesting finding not captured by priorresearch was that the relationship between CEO age and bonusappears to be non-linear in nature. Figures 2 which depicts thisnon-linear function suggest at about age 53, the proportion ofbonus as a percentage of salary begins to decrease at anincreasing rate. As a whole, these findings suggest corporate paycommittees should consider family and the financial circumstancesof the executive when designing remuneration schemes. [ABSTRACT FROM AUTHOR]

This study examines how the compensation committees of a sample of U.S. corporations from the S & P 500 justify their compensation practices to shareholders. Drawing from research on organizational legitimacy as a theoretical base, we examine the effects of ownership structure, CEO pay, and organizational performance on the frequencies of three types of compensation justifications: external validations, shareholder alignment statements, and discussions of company performance. We find that when companies have more concentrated and active outside owners, they are much more likely to justify their compensation practices by citing the role of compensation consultants as advisors in the compensation-setting process. They are also more likely to discuss the alignment of managerial and shareholder interests, and to downplay a company's accounting returns. Companies that pay their CEOs large base salaries are also more likely to cite the role of consultants, and, for those with dispersed ownership, to discuss shareholder alignment. High accounting returns lead companies to emphasize accounting performance in their compensation justifications, and to downplay market returns. High stock price volatility leads companies to de-emphasize market returns. We discuss the implications of these findings for research and theory on the symbolic aspects of company-shareholder relationships. [ABSTRACT FROM AUTHOR]