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This paper analyzes the links among executive compensation, a firm’s strategic orientation, and firm performance. A number of key questions relative to the relationships among these elements remain unanswered because prior research on this subject has reported mixed results, and, moreover, has been confined almost exclusively to U.S. firms. We develop a framework that draws on arguments from agency theory to identify such links. A research design with both archival and survey data is used to test hypotheses in a sample of 253 Spanish companies. We found that top managers’ compensation systems are linked with a firm’s strategic orientations, but in a different form than that of previous studies. Results show two differentiated groups of firms: (1) prospective firms that adapt their managerial compensation systems to the requirements of strategic context, consequently obtaining positive performance effects; and (2) conservative firms that design managerial compensation systems independent of strategic context, consequently not obtaining additional performance benefits.

The purpose of this paper is to examine whether outside CEO directors sympathize with the company CEO due to their similar positions and prestige, and make decisions in favor of the company CEO. Specifically, the authors investigate how outside CEO directors serving on the compensation committee influence CEO compensation.

The authors investigate how outside CEO directors on the compensation committee impact the level and pay‐for‐performance sensitivity of CEO compensation. In addition, the relation between excess CEO compensation (attributable to outside CEO directors) and future firm‐operating performance is examined.

It is found that outside CEO directors on the compensation committee are associated with higher CEO compensation. However, excess CEO compensation attributable to outside CEO directors leads to poor future firm‐operating performance. Outside CEO directors are associated with higher CEO pay‐for‐performance sensitivity when the company experiences positive stock returns, but do not impact pay‐for‐performance sensitivity when firm performance is poor. Finally, when the company CEO has more influence on the board, outside CEO directors are more likely to serve on the compensation committee.

The paper is among the first to show that having outside CEO directors on the compensation committee might create agency problems and is costly to shareholders. The findings of the authors' study are relevant to current efforts of regulators and private sectors to enhance oversight of executive compensation.

Internal Revenue Code §162(m), which applies to public corporations, was designed to reduce executive compensation and strengthen its relation to performance. This article examines the effectiveness of the code section. While the results reflect a continual increase in the compensation of a group of key executives for the years reviewed, evidence is found in support of the performance-based objectives of §162(m). Findings indicate a shift away from salary and toward bonus payments over the time period examined. Further, the link between compensation and performance appears to have strengthened slightly after the enactment of §162(m).

The theory of financial management suggests that the objective of the firm is to maximise shareholder wealth. The valuation of the firm is its net operational cash flows discounted at the stock market's average required rate of return. A firm's risk class determines the rate of return required by investors. The operating objective for management is to maximise the difference between operational receipts and operational expenditures plus investment, whilst minimising risk. However, the separation of ownership by shareholders and control by professional managers enables directors to pursue objectives other than maximisation of shareholder wealth. Directors might attempt to maximise sales revenue, maximise growth in assets or employees, maximise value added or even their own well‐being. They may choose to pursue multiple objectives as described in corporate planning systems. Multiple objectives may include social goals as well as goals relating to marketing, production, personnel and finance. It has been suggested that levels of directors' remuneration might be associated with the extent to which directors achieve corporate objectives. Several research projects have tried to identify the major determinants of directors' remuneration. Some of these are summarised below.

Incentive‐based executive compensation is regarded as a mechanism for alleviating agency problems between executives and shareholders. Seventy‐three New Zealand (NZ) listed companies are used to examine the relationship between executive incentive compensation schemes (ICS) and firm performance. The results suggest that neither compensation level nor adoption of an ICS are significantly related to returns to shareholders or ROA. However, there is a statistically significant relationship between Tobin's q and both CEO compensation and executive share ownership. Further, the evidence suggests the recent compensation disclosure requirements in NZ are not yet stringent enough to allow adequate analysis of the link between ICSs and corporate performance.

This paper aims to investigate the relationship between board of directors' independence and executive compensation disclosures transparency.

The paper examines compensation disclosure practices of a sample of 181 firms listed on the Toronto Stock Exchange. Board independence from management is assessed through an aggregate score which takes into account the proportion of independent directors, board leadership structure (i.e. CEO is the board chairperson), and the existence and independence of board committees. A cross‐sectional regression analysis is used to examine the relationship between board independence and the extent of compensation disclosure.

The paper finds that board independence from management is positively related to the transparency of executive compensation‐related information. In addition, this study documents a positive (negative) relation between firm size, US cross‐listing, growth opportunities (leverage) and the extent of executive compensation disclosure.

The study's results provide support to the managerial opportunism hypothesis in executive compensation. These findings highlight the importance of the board of directors as an effective governance mechanism which limits managerial rent‐seeking in the design as well as the disclosure of executive compensation practices.

This paper extends prior disclosure studies by examining the impact of board characteristics on the transparency of executive compensation disclosures in a principles‐based governance regime. Furthermore, executive compensation disclosure provides an interesting setting in which to examine the ability of the directors to act independently from managers in a conflict of interests situation.

Effects of voice, compensation, and responsibility attribution on justice perception and post‐complaint behavior in a consumer setting were studied in a cross‐cultural study. Hotel school students in China and Canada (N = 168) read and responded to a scenario which described how a service provider handled the complaint from a customer whose coat was stained with tea. The results showed that collectivists were more likely than individualists to blame the service provider. Also, voice offered by the service provider failed to reduce its blame, and compensation actually led to more blame attributed to the service provider. Responsibility attribution was found to be able to mediate the effect of culture on post complaint behavior. A culture by voice interaction indicated that when voice was offered by the service provider, Canadians were less likely to attribute the responsibility to themselves than were Chinese. The implications of these results on justice, culture, and responsibility attribution are discussed.

Prior studies of the role of risk in executive compensation focus on market risk and firm risk, neglecting the role of industry risk in explaining executive compensation. We include industry risk and find that the portion of CEO compensation for bearing industry risk is greater than the portion of CEO compensation for bearing market risk. Consistent with the human capital of a CEO being non-diversifiable, CEOs also receive compensation for bearing firm-specific risk, in contrast to investors, who can diversify their risk over many assets. CEOs are compensated for bearing firm-specific risks through all the compensation tools we examine; salary, bonus, option grants and option exercises. CEOs are compensated for bearing market and industry risk primarily through stock option grants.

This study aims to examine the impact of fiscal deficit, exchange rate and trade openness on current account deficit (CAD). The study tried to empirically investigate the ‘twin deficits hypothesis’ and ‘compensation hypothesis’ in the Indian context.

Autoregressive distributed lagARDL) bound test approach was used by taking annual time series data from 1978 to 2021. The estimates confirm a significant long-run and short-run relationship between dependent variables, i.e. CAD and independent variables such as the fiscal deficit, exchange rate and trade openness.

The results show that positive shocks of all explanatory variables significantly affect the CAD. CAD and fiscal deficit are significantly associated, as the coefficient of fiscal deficit is positive and significant. The study also found that exchange rate and trade openness significantly affect the CAD. The coefficients of exchange rate and trade openness are positive and significant. The findings show that an increase in CADs results from liberal trade policies that help domestic industries grow their trade and expansionary fiscal policy, leading to a higher fiscal deficit. The negative and significant error correction term suggests that short-run disequilibrium converges to long-run equilibrium at a speed of 19.2%. The findings validate the ‘twin deficits hypothesis’ and ‘compensation hypothesis’ in the Indian context.

It can be inferred from the study that liberal policy to promote economic growth and trade openness should be designed and promoted judiciously. An excessive liberalised approach may impact other macroeconomic variables such as current account balances. Integrating the domestic market with global markets poses a big challenge for countries like India that aspire to penetrate global markets. Furthermore, the Indian policy makers should rigorously work and promote the policies such as Fiscal Responsibility and Budget Management (FRBM) as reduction in fiscal deficits, trade imbalances will also be reduced.

This study contributes to the existing literature on ‘twin deficit’ and trade openness by giving new evidence on the trilemma between designing sustainable fiscal policy by spending wisely without imperilling the country's global presence and CAD.

We survey the literature on the Risk Augmented Mincer equation that seeks to estimate the compensation for uncertainty in the future wage to be earned after completing an education. There is wide empirical support for the predicted positive effect of wage variance and the negative effect of wage skew. We discuss robustness of the findings across specifications, potential bias from unobserved heterogeneity and selectivity and consider the core issue of students' information on benefits from education.