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The Impact Of Mandated Disclosure On Performance Based Ceo Compensation
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Book Synopsis The Impact of Mandated Disclosure on Performance-Based CEO Compensation by : Jane Craighead
Download or read book The Impact of Mandated Disclosure on Performance-Based CEO Compensation written by Jane Craighead and published by . This book was released on 2004 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Regulators argue that mandated compensation disclosure improves corporate governance by permitting shareholders to enjoin boards of directors to reward executives in ways that are consistent with shareholder value creation. We posit that mandated compensation disclosure, or the absence thereof, has a greater impact on the CEO compensation practices of widely held firms than of closely held firms. More specifically, we expect that, in the absence of mandated disclosure, CEO compensation is likely to be less performance-contingent among widely held firms than among closely held firms. Moreover, we also expect that the advent of mandated disclosure leads widely held firms to increase the extent to which CEO compensation is performance-contingent, much more so than closely held firms would. We use a unique database resulting from the Ontario Securities Commission amendment of Regulation 638 in October 1993. For the first time, this amendment required firms listed on the Toronto Stock Exchange to provide detailed executive compensation data similar to that required by the SEC, for current year as well as retroactively for the previous two years. We find that, in the absence of mandated disclosure, CEO cash compensation in widely held firms is less performance-contingent than in closely held firms. With the imposition of mandated disclosure, performance-contingent cash compensation increases more in widely held firms than in closely held firms. Results with respect to stock option grants are mixed, with both closely held and widely held firms reacting to the advent of mandated disclosure.
Book Synopsis The Consequences of Mandated Compensation Disclosure by : Hongyan Li
Download or read book The Consequences of Mandated Compensation Disclosure written by Hongyan Li and published by . This book was released on 2017 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: After the SEC mandates the disclosure of Chief Financial Officers (CFOs)' compensation in 2006, CFO pay increases significantly relative to CEO pay, particularly in firms most affected by the mandate. CFOs (but not CEOs) are more likely to leave their firms following poor performance. Earnings management increases in these firms and there are more negative earnings surprises, suggesting an increased managerial effort to withhold bad news. These results are consistent with more intense monitoring following the compensation disclosure mandate. CFOs require additional compensation for the loss of private benefits under greater monitoring, are subject to greater internal discipline, and engage in more short-term behavior to boost their performance and avoid termination.
Book Synopsis Compensation Disclosures and the Weaponization of Executive Pay: Evidence from Revenue-based Performance Evaluation by : Matthew Bloomfield
Download or read book Compensation Disclosures and the Weaponization of Executive Pay: Evidence from Revenue-based Performance Evaluation written by Matthew Bloomfield and published by . This book was released on 2018 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Analytical work on strategic delegation shows that Cournot competitors can boost their profitability by using revenue-based pay to commit to more aggressive behavior (Fershtman and Judd, 1987), but only if pay packages are credibly disclosed (Katz, 1991). However, no empirical evidence demonstrates that firms actually employ such strategies. I exploit a regulatory shock that forced public firms to provide detailed executive pay disclosures, and document that large Cournot competitors adopt revenue-based pay in response to the disclosure mandate. Smaller firms and Bertrand competitors do not respond in this fashion. I find no evidence that agency theory can explain these patterns. Collectively, my results are consistent with strategic delegation, and suggest that, after the mandated disclosure of executive compensation packages, firms design their incentive contracts as strategic weapons, designed to curtail their rivals' competitive actions.
Book Synopsis Two Essays on the Effects of External Pressure on Executive Compensation by : Brandy Elaine Hadley
Download or read book Two Essays on the Effects of External Pressure on Executive Compensation written by Brandy Elaine Hadley and published by . This book was released on 2015 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation analyzes the impact of two external forces on executive compensation behavior. In the first chapter, the impact of political sensitivity is investigated as an external force on government contractor executive compensation. Compensation for top executives has come into the political spotlight, especially over the last decade, with many politicians publicly supporting limits on compensation. However, the impact of political scrutiny to limit compensation is debatable. This study analyzes the effect of political scrutiny on CEO compensation using a sample of Federal contractors, which represents a group of firms where politicians yield the most power. Results suggest that Federal contractors with the most visible government contracts that make up significant portions of their revenue have lower CEO compensation, but the efficiency of this compensation structure is debatable as it leaves CEOs with weaker incentives. However, the impact of political sensitivity is muted when the firm has more bargaining power with the government. In the second chapter, the effects of external forces of mandated compensation disclosure and shareholding voting requirements on compensation behavior are examined. Given the lack of guidelines provided for Dodd-Frank mandated Pay for Performance disclosure and the increase in alternative pay definitions used in Pay for Performance discussions, this chapter analyzes the determinants of and the effects on Say on Pay support of disclosing alternative pay measures. Results suggest that firms that disclose alternative pay measures in their Pay for Performance discussions do so for different reasons. Although certain measures are characteristic of opportunistic disclosure and others are indicative of informative disclosure, effects on Say on Pay are similar yet distinct. There is often a significant positive impact of disclosing additional information related to compensation on Say on Pay approval, particularly when combating prior poor Say on Pay support. However, the positive impact on Say on Pay support is most robust when peer comparisons are shared, providing evidence of the value of reporting comparative pay.
Book Synopsis The Effect of the Pay Ratio Mandate on CEO Compensation by : Steven Irlbeck
Download or read book The Effect of the Pay Ratio Mandate on CEO Compensation written by Steven Irlbeck and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The pay ratio mandate requires most US public firms to explicitly disclose the ratio of CEO compensation to the compensation of the median employee. I exploit two features of the mandate which allow me to identify the causal effect of the mandate on the level and type of CEO compensation, and, in turn, the firms' behavior. My results show that the mandate prompts firms to shift toward performance-based compensation, primarily by increasing equity-based pay and to a lesser degree by reducing salary. Furthermore, the shift in CEO incentives results in greater debt ratios and R&D investments.
Book Synopsis Real Effects of the CEO Pay Ratio Disclosure Mandate by : Kelvin Kwok Shing Yeung
Download or read book Real Effects of the CEO Pay Ratio Disclosure Mandate written by Kelvin Kwok Shing Yeung and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I investigate the real effects of Section 953(b) of the Dodd-Frank Act, which requires that firms disclose the ratio of total CEO compensation to the median employee compensation. Using a difference-in-differences framework and granular data at the establishment-level, I document that Section 953(b) leads to employment cuts. Employment cuts are particularly severe in firms that have high CEO pay, in states that have weak labor protection laws, and in establishments that are part of the firm's noncentral operations. These employment cuts are accompanied by an increase in spending on information technology, suggesting that firms are changing their mixture of inputs rather than downscaling their operations.
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 Research Handbook on Representative Shareholder Litigation by : Sean Griffith
Download or read book Research Handbook on Representative Shareholder Litigation written by Sean Griffith and published by Edward Elgar Publishing. This book was released on 2018 with total page 552 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by leading scholars and judges in the field, the Research Handbook on Representative Shareholder Litigation is a modern-day survey of the state of shareholder litigation. Its chapters cover securities class actions, merger litigation, derivative suits, and appraisal litigation, as well as other forms of shareholder litigation. Through in-depth analysis of these different forms of litigation, the book explores the agency costs inherent in representative litigation, the challenges of multijurisdictional litigation and disclosure-only settlements, and the rise of institutional investors. It explores how related issues are addressed across the globe, with examinations of shareholder litigation in the United States, Canada, the United Kingdom, the European Union, Israel, and China. This Research Handbook will be an invaluable resource on this important topic for scholars, practitioners, judges and legislators.
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.
Book Synopsis Performance Measurement and Management Control by : Marc J. Epstein
Download or read book Performance Measurement and Management Control written by Marc J. Epstein and published by Emerald Group Publishing. This book was released on 2008-08-04 with total page 371 pages. Available in PDF, EPUB and Kindle. Book excerpt: Presents a collection of research in management control and performance measurement. This book offers guidance for both academic researchers and managers as they work toward improving organizations.
Book Synopsis Mandatory Disclosure Reform, Monitoring, and Executive Compensation by : Steven Balsam
Download or read book Mandatory Disclosure Reform, Monitoring, and Executive Compensation written by Steven Balsam and published by . This book was released on 2016 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using the mandatory adoption of International Financial Reporting Standards (IFRS), we examine whether an exogenously imposed disclosure reform that increases the amount of information affects the level of executive compensation. Extant theories suggest that disclosure reforms could either raise or lower compensation. Increased disclosure improves monitoring, reducing managers' informational advantage and opportunities for private benefits leading executives to seek increased explicit compensation. Alternatively, more disclosure allows shareholders to better observe managers' effort and evaluate their ability, potentially reducing the risk and level of compensation. Using a difference-in-differences approach and multiple control groups, we examine CEO and CFO compensation from 45 countries (28 IFRS-adopting and 17 non-adopting) between 2001 and 2012. We find results consistent with compensation increasing after IFRS adoption implying a net reduction in managers' informational advantage and private benefits. We also provide cross-sectional evidence suggesting the increase is related to improved monitoring ability under IFRS.
Book Synopsis Executive Compensation Best Practices by : Frederick D. Lipman
Download or read book Executive Compensation Best Practices written by Frederick D. Lipman and published by John Wiley & Sons. This book was released on 2008-06-27 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: Executive Compensation Best Practices demystifies the topic of executive compensation, with a hands-on guide providing comprehensive compensation guidance for all members of the board. Essential reading for board members, CEOs, and senior human resources leaders from companies of every size, this book is the most authoritative reference on executive compensation.
Book Synopsis Research on Professional Responsibility and Ethics in Accounting by : Cynthia Jeffrey
Download or read book Research on Professional Responsibility and Ethics in Accounting written by Cynthia Jeffrey and published by Emerald Group Publishing. This book was released on 2011-06-01 with total page 261 pages. Available in PDF, EPUB and Kindle. Book excerpt: Focuses on the professional responsibilities of accountants and how they deal with the ethical issues they face. This title features articles on a range of important topics, including professionalism, social responsibility, ethical judgment, and accountability.
Book Synopsis Executive Compensation and Related-party Disclosure by : James Hamilton
Download or read book Executive Compensation and Related-party Disclosure written by James Hamilton and published by CCH Incorporated. This book was released on 2006 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt: As of July 26, 2006, the SEC completed the most sweeping overhaul of executive compensation and related party transaction disclosure in fourteen years. Executive Compensation and Related-Party Disclosure: SEC Rules and Explanations provides timely and thorough explanations, implications and full text of these reforms. The revision puts in place a principles-based disclosure regime designed to give investors the information they need on executive compensation to make informed investment decisions and demystify any financial dealings between executives and their companies. The new rules also enhance and consolidate into one item director independence and related corporate governance disclosure requirements. The heart of the reforms is the new Summary Compensation Table and the new Compensation Discussion and Analysis. The Summary Compensation Table is the principal vehicle for executive compensation, showing the total compensation for each of the named executive officers. For the first time, SEC rules require that all elements of executive compensation must be disclosed and that a total individual compensation number be provided for the five named executive officers. Other tables will display post-retirement compensation and options exercises. The new Compensation Discussion and Analysis (CD&A) section is a narrative principles-based overview explaining material elements of the company's compensation for named executive officers. It provides a company with both an obligation and an opportunity to explain its compensation policies, focusing on the most important factors. It will be filed and thus subject to Sarbanes-Oxley certification. The SEC also mandated a new compensation committee report requiring the committee to state if it has reviewed and discussed the CD&A with management and recommended to the board that the CD&A be included in the annual report.
Book Synopsis The Effects of CEO Equity-Based Compensation on Firm Promptness in Remedying Material Weaknesses in Internal Control by : Xuejiao Liu
Download or read book The Effects of CEO Equity-Based Compensation on Firm Promptness in Remedying Material Weaknesses in Internal Control written by Xuejiao Liu and published by Open Dissertation Press. This book was released on 2017-01-27 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "The Effects of CEO Equity-based Compensation on Firm Promptness in Remedying Material Weaknesses in Internal Control" by Xuejiao, Liu, 刘雪娇, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This thesis investigates how chief executive officer (CEO) equity incentives affect the remediation of material weaknesses (MWs) in internal control. First, we predict that the sensitivity of CEO stock and stock option portfolios to stock price (CEO price sensitivity or delta) has a positive impact on firm promptness in remedying MWs, because CEOs whose personal wealth is tied to stock price suffer losses from negative market reactions to the public disclosure of MWs. Second, we predict that the sensitivity of CEO stock option portfolio to stock-return volatility (CEO volatility sensitivity or vega) has a negative impact on firm promptness in remedying MWs, as firms with internal control weaknesses are associated with higher information and operating risks that manifest in stock return volatility. Our empirical results, based on a sample of firms disclosing MWs in internal control under the Sarbanes-Oxley Act (SOX) during November 15, 2003 and August 27, 2006, are consistent with the above predictions. We further provide evidence that an effective board of directors could mitigate the undesirable, negative impact of CEO volatility sensitivity on MWs remediation. We measure firms' promptness in remedying MWs based on their subsequent internal control audit opinions (e.g., Ashbaugh-Skaife et al. 2008; Goh 2009); and CEO price (volatility) sensitivity as the dollar change in CEO stock and option portfolios (option portfolio) from a 1 percent change in stock price (Core and Guay 2002). This thesis is innovative with respect to the prediction and evidence of the opposing effects from CEO price and volatility sensitivities on internal control quality. This new evidence contributes to the literature that examines managerial incentives embedded in stock-based and option-based compensation plans in various economic contexts (e.g., Knopf et al. 2002; Coles et al. 2006; Low 2009; Armstrong et al. 2013). Our findings suggest that when stock constitutes a major part of CEO compensation, the mandatory disclosure requirement of SOX provides a channel for the stock market to discipline CEO. However, when options dominate CEO compensation, volatility sensitivity and the associated risk-taking incentive can cause CEOs to delay rectifying internal control deficiencies. These results have interesting policy implications for regulators and firms concerning mandatory disclosure and compensation design. Moreover, this thesis contributes to the broad literature on corporate governance by documenting an interaction between corporate governance and CEO incentives, namely that strong corporate governance mitigates the undesirable risking-taking incentive caused by CEO option holdings. Overall, this thesis deepens our understanding on mechanisms through which regulators, firm executives, and boards of directors strengthen internal control over financial reporting in the post-SOX era. DOI: 10.5353/th_b5089945 Subjects: Employee stock options Corporate governance Compensation management Chief executive officers - Salaries, etc Incentives in industry
Book Synopsis The Oxford Handbook of Corporate Governance by : Mike Wright
Download or read book The Oxford Handbook of Corporate Governance written by Mike Wright and published by Oxford University Press, USA. This book was released on 2013-03-28 with total page 830 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate governance remains a central area of concern to business and society, and this Handbook constitutes the definitive source of academic research on this topic, synthesizing international studies from economics, strategy, international business, organizational behavior, entrepreneurship, business ethics, accounting, finance, and law.
Book Synopsis An Empirical Study of Executive Management Team Compensation and Company Performance by : Gregory A. Jonas
Download or read book An Empirical Study of Executive Management Team Compensation and Company Performance written by Gregory A. Jonas and published by . This book was released on 2007 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt: Increasing compensation disclosures mandated by the Securities Exchange Commission provide transparency that allows more shareholders to question the results produced by highly compensated executives. The popular business press often decries the apparent imbalance between executive pay and firm performance. Published academic research has responded with hundreds of studies attempting to explain executive pay in terms of firm performance. The preponderance of these studies focus on Chief Executive Officers. This study empirically examines executive compensation for team effects on future firm performance. Applying a firm specific fixed-effects model to a sample of 13,021 firm-year observations from ExecuComp, the current study regresses top management team compensation and control variables on firm performance averaged one, three, and five years following the year of compensation. One accounting based measure of performance (return on assets) and one market based measure of firm performance (shareholder return) is examined over the one three and five year horizons. Consistent with increasing concerns raised by investors regarding excess executive pay, this study finds evidence that higher top management team pay is associated with companies experiencing lower rates of return in the future. However, higher management team pay is associated with higher profits and market value measured in dollars. Theses effects are significantly different between the short-term and long term components of compensation. Although compensation of the team is highly correlated with the CEO, the compensation of the executive team has incremental effects on future firm performance of the company. This study contributes to the executive compensation literature by providing evidence that the compensation of the top management team affects future company performance. The observed impact of management team compensation on company performance is: incremental to CEO effects noted in prior studies, differential between short- and long-term components of compensation, sensitive to the proxy used for company performance, and attenuates over time. These findings suggest that further research on executive management team compensation is merited in order to address an interesting gap in the extant literature.
