Search results
1 – 10 of over 22000Factors associated with the use of long‐term plans in management compensation contracts and the choice between earnings‐based performance plans and market‐based long‐term plans…
Abstract
Factors associated with the use of long‐term plans in management compensation contracts and the choice between earnings‐based performance plans and market‐based long‐term plans are examined. Results indicate the firms using long‐term plans are large, have diffuse ownership and more long‐term growth. Furthermore, performance plans are more likely to be used when stock‐return variability is high relative to earnings variability. Firms using performance plans are also larger and have more diffuse ownership than firms with market‐based plans alone. Overall, the evidence is consistent with long‐term plans serving as incentive alignment mechanisms.
Jennifer J. Gaver and Kenneth M. Gaver
Empirical evidence on the shareholder wealth effects of changes in executive compensation agreements is provided by a body of research which examines common stock returns around…
Abstract
Empirical evidence on the shareholder wealth effects of changes in executive compensation agreements is provided by a body of research which examines common stock returns around the time that pay packages are modified. Most studies report significantly positive excess stock returns contemporaneous with the compensation event. Despite this, numerous methodological issues prevent researchers from ascribing a causal relation between the compensation change and the observed stock price behavior. This paper critically reviews the accumulated evidence from studies in this literature and suggests directions for future research.
Elizandra Severgnini, Valter Afonso Vieira, Gustavo Abib and Ronei Leonel
The authors extend the recent research using the risk component of human resource’s (HR’s) compensation plans to examine the effects of risk components on two strategic outcomes…
Abstract
Purpose
The authors extend the recent research using the risk component of human resource’s (HR’s) compensation plans to examine the effects of risk components on two strategic outcomes: within-firm temporal change, or strategic variation, and firm strategic divergence from the industry, or strategic deviation. In addition, the authors examine the role of previous financial performance as a boundary moderator condition of the effects of risk components in the compensation plan and firm strategic outcomes.
Design/methodology/approach
To examine the effects of low- and high-risk components of executive compensation on strategic variation and deviation over time, the authors collected data from 2,510 companies listed in the Standard and Poor’s 500 index in a panel data format of a 12-year period. The authors gathered financial and other firm-level data from COMPUSTAT, and executive compensation and executive-level data from ExecuComp.
Findings
The findings support the main effects of risk components on strategic change, while both high- and low-risk components act on strategic deviation contingent on the moderating role of total shareholder return (TSR). In the theoretical framework, the authors test the moderating role of total shareholder return (TSR) as a boundary condition of the effects of risk components in the compensation plan. In doing so, the authors provide a fine-grained understanding of the influence of compensation plan risk components on outcomes proximal to executives, such as the maintenance of the status quo and the search for financial gains.
Research limitations/implications
New studies can explore a three-way moderating effect on performance indicators, such as TSR, Tobin’s Q and return on asset. The authors addressed this limitation and did a comparative analysis, but the authors did not include additional moderating mechanisms in these interactive effects.
Practical implications
By disaggregating the executive’s compensation based on the risk components, boards of directors can mitigate any possible unwanted biases in the relationship between principal and agent.
Originality/value
By considering the influence of both low- and high-risk components of compensation plans on strategic outcomes –instead of firm performance – this study expands strategy literature supporting the influence of compensation schema on a firm’s outcomes. This path is new because it offers a moderating perspective to understand the strategic deviations and changes that chief executive officers imprint in their firms.
Propósito
Los autores amplían la investigación reciente usando el componente de riesgo de los planes de compensación de RH para examinar los efectos de los componentes de riesgo en dos resultados estratégicos: cambio temporal dentro de la empresa, o variación estratégica, y divergencia estratégica de la empresa de la industria, o desviación estratégica. Además, examinamos el papel del desempeño financiero anterior como una condición moderadora límite de los efectos de los componentes de riesgo en el plan de compensación y los resultados estratégicos de la empresa.
Diseño/metodología/enfoque
Para examinar los efectos de los componentes de alto y bajo riesgo de la compensación ejecutiva en la variación y desviación estratégica a lo largo del tiempo, recopilamos datos de 2510 empresas que figuran en el índice Standard & Poor's 500 en un formato de datos de panel de un período de 12 años. Los autores recopilaron datos financieros y de otro tipo a nivel de empresa de COMPUSTAT, y compensación de ejecutivos, y datos a nivel ejecutivo de EXECUCOMP.
Hallazgos
Nuestros hallazgos respaldan los efectos principales de los componentes de riesgo en el cambio estratégico, mientras que los componentes de alto y bajo riesgo actúan sobre la desviación estratégica dependiendo del papel moderador del rendimiento total del accionista. En el marco teórico, los autores prueban el papel moderador del Retorno Total del Accionista como condición límite de los efectos de los componentes de riesgo en el plan de compensación. Al hacerlo, brindamos una comprensión detallada de la influencia de los componentes de riesgo del plan de compensación en los resultados próximos a los ejecutivos, como el mantenimiento del statu quo y la búsqueda de ganancias financieras.
Originalidad
al considerar la influencia de los componentes de bajo y alto riesgo de los planes de compensación en los resultados estratégicos, en lugar del desempeño de la empresa, este estudio amplía la literatura de estrategia que respalda la influencia del esquema de compensación en los resultados de una empresa. Este camino es nuevo porque ofrece una perspectiva moderadora para entender las desviaciones y cambios estratégicos que los CEOs imprimen en sus firmas.
Limitaciones/implicaciones de la investigación
los nuevos estudios pueden explorar un efecto moderador de tres vías en los indicadores de rendimiento, como TSR, Tobin's Q y ROA. Abordamos esta limitación e hicimos un análisis comparativo, pero no incluimos mecanismos moderadores adicionales en estos efectos interactivos.
Implicaciones prácticas
al desagregar la compensación del ejecutivo en función de los componentes de riesgo, las juntas directivas pueden mitigar cualquier posible sesgo no deseado en la relación entre el principal y el agente.
Objetivo
Os autores estendem a pesquisa recente usando o componente de risco dos planos de remuneração de RH para examinar os efeitos dos componentes de risco em dois resultados estratégicos: mudança temporal dentro da empresa, ou variação estratégica, e divergência estratégica da empresa do setor, ou desvio estratégico. Além disso, examinamos o papel do desempenho financeiro anterior como uma condição moderadora dos efeitos dos componentes de risco no plano de remuneração e nos resultados estratégicos da empresa.
Projeto/metodologia/abordagem
Para examinar os efeitos dos componentes de baixo e alto risco da remuneração executiva na variação e desvio estratégico ao longo do tempo, coletamos dados de 2.510 empresas listadas no índice Standard & Poor's 500 em um formato de dados de painel de um período de 12 anos. Os autores coletaram dados financeiros e de outros níveis da empresa da COMPUSTAT, remuneração executiva e dados de nível executivo da EXECUCOMP.
Resultados
Nossos resultados suportam os principais efeitos dos componentes de risco na mudança estratégica, enquanto os componentes de alto e baixo risco atuam no desvio estratégico contingente ao papel moderador do Retorno Total ao Acionista. No referencial teórico, os autores testam o papel moderador do Total Shareholder Return como condição limite dos efeitos dos componentes de risco no plano de remuneração. Ao fazer isso, fornecemos uma compreensão refinada da influência dos componentes de risco do plano de remuneração nos resultados próximos aos executivos, como a manutenção do status quo e a busca por ganhos financeiros.
Originalidade
ao considerar a influência dos componentes de baixo e alto risco dos planos de remuneração nos resultados estratégicos -em vez do desempenho da empresa- este estudo expande a literatura de estratégia que apoia a influência do esquema de remuneração nos resultados de uma empresa. Esse caminho é novo porque oferece uma perspectiva moderadora para entender os desvios e mudanças estratégicas que os CEOs imprimem em suas empresas.
Limitações/implicações da pesquisa
Novos estudos podem explorar um efeito moderador de três vias em indicadores de desempenho, como TSR, Q de Tobin e ROA. Abordamos essa limitação e fizemos uma análise comparativa, mas não incluímos mecanismos moderadores adicionais nesses efeitos interativos.
Implicações práticas
Ao desagregar a remuneração do executivo com base nos componentes de risco, os conselhos de administração podem mitigar possíveis vieses indesejados na relação entre principal e agente.
Details
Keywords
Following the provisions of the Planning and Compensations Act,1991 we have a planning system under which, in principle, nocompensation is paid for the refusal of planning…
Abstract
Following the provisions of the Planning and Compensations Act, 1991 we have a planning system under which, in principle, no compensation is paid for the refusal of planning permission. One way remains by which compensation can still be obtained – it is by way of a purchase notice under section 137 of the Town and Country Planning Act or section 32 of the Listed Building Act, 1990. Examines the legal rules governing purchase notices and then goes on to analyse the valuation and compensation implications.
Details
Keywords
Janet R. McColl‐Kennedy, Geoffrey C. Kiel and Susan J. Dann
Reports a study of the salesforce compensation practices inmanufacturing companies which is the first of its kind undertaken inAustralia. Australian companies rely heavily on…
Abstract
Reports a study of the salesforce compensation practices in manufacturing companies which is the first of its kind undertaken in Australia. Australian companies rely heavily on salary as the main form of salesforce compensation, unlike in the USA where the majority of salespeople are rewarded using commission‐based means. To a lesser extent, this is also true for Britain. The companies in this study, like many European firms, make relatively little use of performance‐related compensation methods such as commission. These findings are surprising, given that most companies reported that the main objective of their compensation plans was to reward above average performance. Such discrepancies between objectives and methods appear to be widespread and can, in part, be related to the social and legal environment in which Australian companies operate.
Details
Keywords
Chunwei Xian, Fang Sun and Yinghong Zhang
This study aims to investigate the moderating effect of equity-based compensation on the sources of book-tax differences. The authors investigate whether equity-based compensation…
Abstract
Purpose
This study aims to investigate the moderating effect of equity-based compensation on the sources of book-tax differences. The authors investigate whether equity-based compensation affects the association between book-tax differences and tax planning, and the association between book-tax differences and earnings management.
Design/methodology/approach
The authors use a sample of 9,024 firm-year observations (913 firms) spanning the period 1992-2011, obtained from ExecuComp and Compustat. They estimate cross-sectional regressions of the proxy for tax planning, discretionary accruals and their interactions with equity-based compensation on book-tax differences.
Findings
The authors find that tax planning-related book-tax differences increase as the equity-based pay of executives does, and that earnings management-related book-tax differences decrease as the equity-based pay of executives increases. The results are robust across three alternative measures of tax planning.
Originality/value
Equity-based compensation plays an important role in managerial discretion on tax planning and earnings management. The findings suggest that, although equity incentives promote a high level of both tax planning and earnings management, they motivate managers to constrain the level of earnings management to avoid larger book-tax differences.
Details
Keywords
The purpose of this paper is to examine the determinants of US firms' postretirement benefits choices.
Abstract
Purpose
The purpose of this paper is to examine the determinants of US firms' postretirement benefits choices.
Design/methodology/approach
The paper uses empirical methodology (univariate and multivariate) to test the research hypotheses.
Findings
Industry norm, average employee age, financial structure, and firm size are significant factors in the determination of the proportion of compensation that is deferred. Industry norm, financial structure, and firm size are significant factors that determine the percentage of deferred compensation that is negotiated as defined benefits. Finally, industry norm, corporate tax rates, and cash flow help explain the percentage of defined benefits that are paid in the form of retiree health benefit plans.
Research limitations/implications
Data requirements might bias the sample towards larger sized firms. Data availability limits the number of observations in 2000 and 2001.
Practical implications
The trends in post‐retirement benefits reported in this paper are important for policy makers.
Originality/value
These findings have implications for the baby boomers. The trend to offer smaller proportion of compensation as deferred benefits reflects the increasing costs of deferral to the employers. This increases the employees' responsibilities to save on their own. This also would shift the retirees' dependence on the public pension system for their retirement income. The trend to favor defined‐contribution plans instead of defined‐benefit plans reflects the employers' attempts to diversify their risks of paying promised post‐retirement benefits by transferring the risk to the employee. On the other hand, the popularity of defined‐contribution pension plans also reflects the increased Government's incentives to encourage savings via 401‐k plans and employee's willingness to manage their own pension portfolios.
Details
Keywords
Some companies are now seeking to design compensation plans that not only reward performance but also improve it. They want techniques that look forward, beyond their current…
Abstract
Some companies are now seeking to design compensation plans that not only reward performance but also improve it. They want techniques that look forward, beyond their current situation and even beyond pay systems themselves. This approach is called strategic compensation design. It involves focusing on what an organization needs to do to become more competitive and then on developing a compensation plan to help.
S. Leanne Keddie and Michel Magnan
This paper aims to examine how the use of environmental, social and governance (ESG) incentives intersects with top management power and various corporate governance mechanisms to…
Abstract
Purpose
This paper aims to examine how the use of environmental, social and governance (ESG) incentives intersects with top management power and various corporate governance mechanisms to affect excess annual cash bonus compensation.
Design/methodology/approach
The authors use a novel artificial intelligence (AI) technique to obtain data about ESG incentives use by firms in the S&P 500. The authors test the hypotheses with an endogenous treatment-regression and a contrast test.
Findings
When the top management team has power and uses ESG incentives, there is a 32% reduction in excess annual cash bonuses implying ESG incentives are an effective corporate governance tool. However, nuanced analyses reveal that when powerful management teams with ESG incentives are from environmentally sensitive industries, have a corporate social responsibility (CSR) committee or have long-term view institutional shareholders, they derive excess bonuses.
Practical implications
Stakeholders will better understand management’s motivations for the inclusion of ESG incentives in executive compensation contracts and be able to identify situations which require closer scrutiny.
Social implications
Given the increased popularity of ESG incentives, society, regulators, boards of directors and management teams will be interested in better understanding when these incentives might be effective and when they might be abused.
Originality/value
To the best of the authors’ knowledge, this study is the first to examine the use of ESG incentives in relation to excess pay. The authors contribute to both the CSR and executive compensation literatures. The work also uses a new methodological technique using AI to gather difficult-to-obtain data, opening new avenues for research.
Details