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Changes In The Structure Of Ceo Compensation And The Firms Pay Performance Sensitivity Following Ceo Turnover
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Book Synopsis Changes in the Structure of CEO Compensation and the Firm's Pay- Performance Sensitivity Following CEO Turnover by : David W. Blackwell
Download or read book Changes in the Structure of CEO Compensation and the Firm's Pay- Performance Sensitivity Following CEO Turnover written by David W. Blackwell and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We document significant improvements in earnings and stock returns after CEO turnover. Compared to old CEOs, new CEOs derive more of their compensation from salary and bonus and option grants, but less from stock holdings. The sensitivity of pay to performance increases significantly after a change in CEO. The salary and bonus of the new CEO is much more sensitive to performance than that of the old CEO; stock holdings and option grants are less sensitive. Changes in pay-performance sensitivity are greater after exogenous turnover than after exogenous turnover.
Book Synopsis CEO Pay and Firm Performance by : Paul L. Joskow
Download or read book CEO Pay and Firm Performance written by Paul L. Joskow and published by . This book was released on 1994 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the dynamic structure of the pay-for- performance relationship in CEO compensation and quantifies the effect of introducing a more complex model of firm financial performance on the estimated performance sensitivity of executive pay. The results suggest that current compensation responds to past performance outcomes, but that the effect decays considerably within two years. This contrasts sharply with models of infinitely persistent performance effects implicitly assumed in much of the empirical compensation literature. We find that both accounting and market performance measures influence compensation and that the salary and bonus component of pay as well as total compensation have become more sensitive to firm financial performance over the past two decades. There is no evidence that boards fail to penalize CEOs for poor financial performance or reward them disproportionately well for good performance. Finally, the data suggest that boards may discount extreme performance outcomes -both high and low - relative to performance that lies within some `normal' band in setting compensation.
Book Synopsis CEO Turnover by : Kathleen Anne Farrell
Download or read book CEO Turnover written by Kathleen Anne Farrell and published by . This book was released on 1994 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pay Without Performance by : Lucian A. Bebchuk
Download or read book Pay Without Performance written by Lucian A. Bebchuk and published by Harvard University Press. This book was released on 2004 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Book Synopsis How to Make Boards Work by : A. Kakabadse
Download or read book How to Make Boards Work written by A. Kakabadse and published by Springer. This book was released on 2013-12-02 with total page 548 pages. Available in PDF, EPUB and Kindle. Book excerpt: How to Make Boards Work offers a unique view of the thinking and doing of governance. The outside-in perspective offers a holistic framework highlighting how global cultural, social and political diversity impact boards of directors. The inside-out perspective emphasizes how governance and boards can effectively realize sustainable value creation.
Book Synopsis The Impact of the Likelihood of Turnover on Executive Compensation by : Jay C. Hartzell
Download or read book The Impact of the Likelihood of Turnover on Executive Compensation written by Jay C. Hartzell and published by . This book was released on 2008 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study analyzes the role of three incentive devices in managerial compensation: pay for performance, termination, and career concerns. A model is derived which shows that the three incentives are substitutes; where the termination (or career concerns) incentive is low, the optimal contract contains stronger pay-for-performance incentives. The empirical implication, then, is that the pay-for-performance sensitivity of managers should be decreasing (increasing) in the probability of termination (retirement). To test the model s predictions, I first use a sample of CEOs to estimate the probabilities of forced and voluntary turnover. Then, these estimated probabilities are compared to the CEOs estimated pay-for-performance sensitivity. The evidence is consistent with the hypothesis that boards consider the likelihood of termination when setting the compensation contract; the relationship between changes in CEO compensation and firm performance is decreasing in the estimated probability of forced turnover. While CEOs nearing retirement do not appear to have compensation that is increasingly sensitive to performance, their wealth does have increased sensitivity. Consistent with the model s intuition, the sensitivity of total CEO firm-related wealth to performance is positively related to the probability of voluntary turnover.
Book Synopsis CEO Pay and Firm Performance by : Paul L. Joskow
Download or read book CEO Pay and Firm Performance written by Paul L. Joskow and published by . This book was released on 2010 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the dynamic structure of the pay-for- performance relationship in CEO compensation and quantifies the effect of introducing a more complex model of firm financial performance on the estimated performance sensitivity of executive pay. The results suggest that current compensation responds to past performance outcomes, but that the effect decays considerably within two years. This contrasts sharply with models of infinitely persistent performance effects implicitly assumed in much of the empirical compensation literature. We find that both accounting and market performance measures influence compensation and that the salary and bonus component of pay as well as total compensation have become more sensitive to firm financial performance over the past two decades. There is no evidence that boards fail to penalize CEOs for poor financial performance or reward them disproportionately well for good performance. Finally, the data suggest that boards may discount extreme performance outcomes -both high and low - relative to performance that lies within some `normal' band in setting compensation.
Book Synopsis Investor Protection, CEO Pay and CEO Turnover by : Sihong Zhang
Download or read book Investor Protection, CEO Pay and CEO Turnover written by Sihong Zhang and published by . This book was released on 2015 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines CEO compensation and turnover in eight countries (including Australia, India, Ireland, Malaysia, Netherlands, New Zealand, South Africa and United Kingdom) from 2000 to 2013 period and focuses on how legal investor protection affects compensation and replacement decisions. I use logistic regressions to investigate the association between investor protection and pay-performance sensitivity, and the association between investor protection and turnover-performance sensitivity. My empirical analysis documents that in firms with stronger investor protection, CEO cash compensation and turnover are more sensitive to accounting performance. And such an effect of investor protection is more pronounced for firms with low level of earnings management. However, the association between investor protection and the CEO pay-performance relationship is weaker after including equity-based compensation.
Book Synopsis Executive Compensation Regulation and the Dynamics of the Pay-performance Sensitivity by : Ralf Sabiwalsky
Download or read book Executive Compensation Regulation and the Dynamics of the Pay-performance Sensitivity written by Ralf Sabiwalsky and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A substantial number of empirical studies on the linear relationship between executive compensation and firm performance for European firms suggest that the pay-performance sensitivity is not significantly positive. We argue that a nonlinear structure fits the data better, because compensation contracts provide for minimum performance benchmarks and an upper limit to the variable component of compensation. We test for such discontinuities in the pay performance relationship, and confirm their existence, using hand collected data from German Prime All Share firms' CEO bonus compensation. It turns out that there is a significant positive relationship between return on assets and CEO bonus for ROA between -3% and +20%. Performance sensitivity is then tested for changes over time between 2006 and 2009. Results reveal that during the first three years after the introduction of a statutory transparency rule in 2005 governing the disclosure of individual CEO compensation, significant changes to compensation contracts did not occur; but that in 2009 the pay-performance sensitivity exhibited a significant increase, which coincides with the passing of a law that requires supervisory boards to ensure that new CEO employment contracts provide for "reasonable" compensation. -- Executive Compensation ; Regulation ; Pay Performance Sensitivity
Book Synopsis Investment Opportunities and the Structure of Performance-Based Executive Compensation by : William R. Baber
Download or read book Investment Opportunities and the Structure of Performance-Based Executive Compensation written by William R. Baber and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The contracting paradigm advanced in Smith and Watts (1992) suggests that both the risk-sharing and incentive consequences of performance-contingent compensation depend on the extent that investment opportunities comprise firm value. Following Smith and Watts we hypothesize that sensitivity of CEO compensation to measures of firm performance varies directly with future investment opportunities. We also hypothesize that investment opportunities promote the use of market-based rather than accounting-based performance measures. Results using 1992- 1993 compensation paid to 1249 CEOs of publicly-traded U.S. firms are consistent with these hypotheses.
Book Synopsis Manipulation Effects of Managerial Discretion on Executive Compensation by : Changzheng Zhang
Download or read book Manipulation Effects of Managerial Discretion on Executive Compensation written by Changzheng Zhang and published by Nova Science Publishers. This book was released on 2016 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: Facing with the ever increasing change of the business environment, the firms have recognized that their persistent competitive edge increasingly depends on whether or not they own the dedicated, experienced and capable CEOs. In the global practice, more and more firms have tried, or are trying, or will try to change their CEOs in order to get higher firm performance or just to get out of recession. Especially it is true in China. However, in theory, the literature in the related fields, such as the corporate governance, the strategic human resource management, the strategy management, the principal-agent theory and so on, has only addressed how to arrange managerial discretion and executive compensation reasonably under the normal circumstances, while ignoring the conditions of CEO change. Therefore, each stakeholder in the post-CEO change period has no clear theoretical guidances on how to reallocate managerial discretion and reset executive compensation for the fresh CEOs. Such a theoretical research gap has leaded to a large number of failures in the issue of CEO change. In order to make up this gap, this book tries to investigate the relationship between managerial discretion and executive compensation under the conditions of CEO change, which can not only practically guide the re-balancing of the corporate governance and further improve the success possibility of CEO change, but can theoretically enrich the contributions in managerial discretion approach and executive compensation theory. Based on the comparative study perspective, by drawing on the data from Chinese listed companies as the sample and adopting the Correlation Analysis, Multiple Linear Regression and Hierarchical Models as the statistical analysis methods, the book investigates how managerial discretion, respectively for the fresh CEOs and the senior CEOs, manipulates each dimension of executive compensation, i.e. executive compensation level, CEO pay-performance sensitivity, executive compensation gap and executive-employee compensation gap. The book makes two valuable new findings: First, the book confirms that both the fresh CEOs and the senior CEOs have the motives and capabilities to manipulate each dimension of executive compensation, but varying by intent and intention; Second, the book proves that the fresh CEOs show higher firm-serving motives when they manipulate each dimension of executive compensation by performing managerial discretion, while the senior CEOs show relatively higher self-serving motives. Based on the research results, the book builds the fresh-keeping mechanisms of firm-serving motives of the fresh CEOs during their whole CEO tenure, which are of great meanings for the government, the scholars and the practitioners and so on.
Book Synopsis Strategic Leadership by : Sydney Finkelstein
Download or read book Strategic Leadership written by Sydney Finkelstein and published by Strategic Management. This book was released on 2009 with total page 480 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book integrates and assesses the vast and rapidly growing literature on strategic leadership, which is the study of top executives and their effects on organizations. The basic premise is that in order to understand why organizations do the things they do, or perform the way they do, we need to deeply comprehend the people at the top-- their experiences, abilities, values, social connections, aspirations, and other human features. The actions--or inactions--of a relatively small number of key people at the apex of an organization can dramatically affect organizational outcomes. The scope of strategic leadership includes individual executives, especially chief executive officers (CEOs), groups of executives (top management teams, or TMTs); and governing bodies (particularly boards of directors). Accordingly, the book addresses an array of topics regarding CEOs (e.g., values, personality, motives, demography, succession, and compensation); TMTs (including composition, processes, and dynamics); and boards of directors (why boards look and behave the way they do, and the consequences of board profiles and behaviors). Strategic Leadership synthesizes what is known about strategic leadership and indicates new research directions. The book is meant primarily for scholars who strive to assess and understand the phenomena of strategic leadership. It offers a considerable foundation on which professionals involved in executive search, compensation, appraisal and staffing, as well as board members who evaluate executive performance and potential, might build their tools and perspectives.
Book Synopsis Executive Compensation and Earnings Management Under Moral Hazard by : Bo Sun
Download or read book Executive Compensation and Earnings Management Under Moral Hazard written by Bo Sun and published by DIANE Publishing. This book was released on 2010-08 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Analyzes executive compensation in a setting where managers may take a costly action to manipulate corporate performance, and whether managers do so is stochastic. Examines how the opportunity to manipulate affects the optimal pay contract, and establishes necessary and sufficient conditions under which earnings management occurs. The author¿s model provides a set of implications on the role earnings management plays in driving the time-series and cross-sectional variation of executive compensation. In addition, the model's predictions regarding the changes of earnings management and executive pay in response to corporate governance legislation are consistent with empirical observations. Charts and tables.
Book Synopsis A Study on the Effect of the Mandated Change in Board Composition on Firm Performance & Ceo Compensation by : Dishant D. Pandya
Download or read book A Study on the Effect of the Mandated Change in Board Composition on Firm Performance & Ceo Compensation written by Dishant D. Pandya and published by . This book was released on 2021 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I examine the long-run effect of the 2003 mandated change in board composition on firm performance and CEO compensation. In the first essay, I examine the impact of changes in firm performance to shed light on the debate between agency and insider-knowledge theorists. Agency theorists argue that installing an independent board would increase monitoring of management, thereby enhancing firm performance. In contrast, the insider-knowledge hypothesis suggests that an independent board lacks valuable insider information for effective advisory functions and, hence, is detrimental to firm performance. In the second essay, I investigate the effect of the mandate on CEO compensation to shed light on the debate between two agency viewpoints: the managerial power view and the complementarity view. The former suggests that total CEO compensation will decrease to better align CEOs' interests with those of shareholders. The latter argues that total CEO compensation will increase following the mandate to compensate executives for bearing firm-specific risks inherent in performance-based incentive packages. Using a difference-in-difference approach, I find a positive relationship between board independence and firm performance in the first essay, consistent with agency theory. I also find a positive relationship between board independence and CEO compensation in the second essay, along with an increase in pay-for-performance sensitivity, consistent with the complementarity view.
Book Synopsis Research Handbook on Executive Pay by : John S. Beasley
Download or read book Research Handbook on Executive Pay written by John S. Beasley and published by Edward Elgar Publishing. This book was released on 2012-01-01 with total page 553 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research on executive compensation has exploded in recent years, and this volume of specially commissioned essays brings the reader up-to-date on all of the latest developments in the field. Leading corporate governance scholars from a range of countries set out their views on four main areas of executive compensation: the history and theory of executive compensation, the structure of executive pay, corporate governance and executive compensation, and international perspectives on executive pay. The authors analyze the two dominant theoretical approaches – managerial power theory and optimal contracting theory – and examine their impact on executive pay levels and the practices of concentrated and dispersed share ownership in corporations. The effectiveness of government regulation of executive pay and international executive pay practices in Australia, the US, Europe, China, India and Japan are also discussed. A timely study of a controversial topic, the Handbook will be an essential resource for students, scholars and practitioners of law, finance, business and accounting.
Book Synopsis CEO Prior Uncertainty and Pay-Performance Sensitivity by : Jiyoon Lee
Download or read book CEO Prior Uncertainty and Pay-Performance Sensitivity written by Jiyoon Lee and published by . This book was released on 2017 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: CEOs' pay-performance sensitivity (delta) is higher in the first year after being hired than in the following years. I explain this finding with reference to CEO prior uncertainty: due to information asymmetry and/or uncertainty about the quality of the match between a CEO and a firm, first-year compensation is often arranged to depend largely on performance. Consistent with this explanation, CEOs with higher prior uncertainty exhibit higher first-year delta: First-year delta is higher for outsider CEOs than insider CEOs. Among outsider CEOs, first-year delta is lower for former executives of large public firms and older CEOs. An insider CEO's service time in a firm prior to becoming the CEO reduces first-year delta.
Book Synopsis Pay without Performance by : Lucian Bebchuk
Download or read book Pay without Performance written by Lucian Bebchuk and published by Harvard University Press. This book was released on 2006-09-30 with total page 293 pages. Available in PDF, EPUB and Kindle. Book excerpt: The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
