Search results

1 – 10 of over 24000
To view the access options for this content please click here
Article
Publication date: 23 October 2020

Alexandre Dias, Victor Vieira and Bruno Figlioli

This study aims to investigate how different executive compensation structures were related to the performance of firms.

Abstract

Purpose

This study aims to investigate how different executive compensation structures were related to the performance of firms.

Design/methodology/approach

This study was based on a sample of companies with the highest standards of corporate governance listed on the Brazilian Stock Exchange. We adopted the multiple correspondence analysis followed by the hierarchical cluster analysis to propose a typology defined by fixed and variable components of the executive compensation and multiple firm performance indicators.

Findings

The analysis produced three clusters, which were submitted to robustness tests, highlighting that companies used the compensatory incentives in striking distinct ways as governance mechanisms. The study found a positive relationship between the performance of companies and the variable incentives of executive compensation, especially the long-term incentive, as well as a negative relationship between the performance of firms and the fixed component of the compensation structure.

Research limitations/implications

This research, whose sample was based on an emerging market, adds empirical evidence to the literature. However, future studies are invited to address the relationships between executive compensation structures and firm performance in other markets, as well as to examine these relationships in companies with distinct levels of governance.

Practical implications

This study provides insights on how the incentive structure can be adopted as an efficient governance mechanism, especially for companies in emerging markets.

Originality/value

The main novelty of this paper is that the methodological strategy used here enabled the authors to discriminate distinct executive compensation structures and establish a relationship between these compensation structures and different types of performance indicators.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 7
Type: Research Article
ISSN: 1472-0701

Keywords

To view the access options for this content please click here
Article
Publication date: 31 August 2010

Yudan Zheng

The paper aims to study the effect of tenure on the structure of CEO compensation. The relation between CEO compensation and CEO tenure provides a good testing bed for…

Abstract

Purpose

The paper aims to study the effect of tenure on the structure of CEO compensation. The relation between CEO compensation and CEO tenure provides a good testing bed for many effects: the managerial power effect, the portfolio consideration effect, the learning effect, and the career concern effect.

Design/methodology/approach

Tobit regressions were run of the percentage of equity‐based compensation on CEO tenure and the effect of tenure compared between inside CEOs and outside CEOs.

Findings

It was found that the percentage of equity‐based compensation increases during the early years of tenure for outside CEOs, and decreases during the later years of tenure for inside CEOs. Before they are tenured, outside CEOs have significantly higher and faster growing percentage of equity‐based compensation than inside CEOs. Furthermore, the portfolio consideration effect and the learning effect are the major effects in explaining the effect of tenure on the compensation structure.

Practical implications

The evidence that boards of directors take into account the CEOs’ holdings of equity incentives, the types of CEOs, and their years on tenure to adjust the structure of CEO compensation indicates that firms should, and do, try to optimize their CEO compensation structure on the basis of firm‐specific or CEO‐specific characteristics. It is suggested that there is no simple formulaic approach to governance reform.

Originality/value

The paper contributes to the literature by studying and explaining the different patterns of compensation structure over CEO tenure between inside CEOs and outside CEOs.

Details

Managerial Finance, vol. 36 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article
Publication date: 4 September 2020

Mohammad Ali Ashraf

The purpose of this paper is to examine the direct and indirect effects of demographic factors on employee compensation, job satisfaction and organizational commitment in…

Abstract

Purpose

The purpose of this paper is to examine the direct and indirect effects of demographic factors on employee compensation, job satisfaction and organizational commitment in private higher educational institutes in Bangladesh. Specifically, how do compensation structure and job satisfaction mediate in the link between demographic factors and organizational commitment? To answer this question, a theoretical framework using the theory of employee retention provided by Martin and Kaufman, as its basis was established.

Design/methodology/approach

Data (n = 515) were collected from faculty members of the private universities in Bangladesh. Structural equation modeling was used to analyze the data.

Findings

Findings indicate that though demographic factors have no direct impact on organizational commitment, they have indirect impacts on organizational commitment through the mediation of compensation structure and faculty job satisfaction. Besides, compensation structure also has a significant mediating role in the link between demographic structure and faculty job satisfaction.

Research limitations/implications

One possible drawback is the number of private universities from which the data were collected. In the sample used here, only 20 private universities were selected to conduct the survey. Besides, the study could not include public universities that are also a significant part and parcel of higher education in the country. So, if more private and public universities were taken into consideration to collect the data, the results might be improved. Thus, the usual cautions about overgeneralizing findings from this sample, to populations for which it is not strictly representative, apply.

Practical implications

From a practical perspective, as a cumulative body of work on organizational commitment, we will be better able to advise policymakers and educators on the elements they need to address to increase the longer engagement of the faculty members in their institutes. In this study, the one area of findings that may help policymakers and educators the most concerns compensation package that affects job satisfaction and organizational commitment. We found that demographic factors and compensation packages are the most important factors for the faculty members to impact on organizational commitment in this study.

Social implications

The social implication is that policymakers of the private universities can focus on fair justice in terms of demographic factors and compensation package for job satisfaction, motivation and organizational commitment of the faculty members in their universities.

Originality/value

The findings of the study are important for the policymakers of the higher education institutes.

Details

Journal of Global Responsibility, vol. 11 no. 4
Type: Research Article
ISSN: 2041-2568

Keywords

To view the access options for this content please click here
Article
Publication date: 9 March 2015

Krishna Reddy, Sazali Abidin and Linjuan You

The purpose of this paper is to investigate the relationship between Chief Executive Officers’ (CEOs) compensation and corporate governance practices of publicly listed…

Abstract

Purpose

The purpose of this paper is to investigate the relationship between Chief Executive Officers’ (CEOs) compensation and corporate governance practices of publicly listed companies in New Zealand for the period 2005-2010.

Design/methodology/approach

Prior literature argues that corporate governance systems and structures are heterogeneous, that is, corporate governance mechanisms that are important tend to be specific to a country and its institutional structures. The two corporate governance mechanisms most important for monitoring CEO compensation are ownership structure and board structure. The authors use a generalised least squares regression estimation technique to examine the effect ownership structure and board structure has on CEO compensation, and examine whether ownership structure, board structure, CEO and director compensation have an effect on company performance.

Findings

After controlling for size, performance, industry and year effects, the authors report that internal features rather than external features of corporate governance practices influence CEO compensation. Companies that have their CEO on the board pay them more than those who do not sit on the board, suggesting CEOs on boards have power to influence board decisions and therefore boards become less effective in monitoring CEO compensation in the New Zealand context. Companies that pay their directors more tend to reward their CEOs more as well, thus supporting the managerial entrenchment hypothesis.

Research limitations/implications

The results confirm the findings reported in prior studies that institutional investors are ineffective in monitoring managerial decisions and their focus is on decisions that benefit them on a short-term basis.

Practical implications

The findings indicate that although the proportion of independent directors on boards does not significantly influence CEO compensation, it does indicate that outside directors are passive and are no more effective than insiders when it comes to the oversight and supervision of CEO compensation.

Originality/value

Being a small and open financial market with many small- and medium-sized listed companies, New Zealand differs from large economies such as the UK and the USA in the sense that CEOs in New Zealand tend to be closely connected to each other. As such, the relationship between pay-performance for New Zealand is found to be different from those reported for the UK and the USA. In New Zealand, the proportion of institutional and/or block shareholders is positively associated with CEO compensation and negatively associated with company performance, suggesting that it is not an effective mechanism for monitoring CEO compensation.

Details

Managerial Finance, vol. 41 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Book part
Publication date: 1 October 2015

Yuedong Li, Anna M. Rose, Jacob M. Rose and Fengchun Tang

This study examines the effects of incentive compensation and guanxi, a type of informal personal relationship between people, on the objectivity of Chinese internal…

Abstract

Purpose

This study examines the effects of incentive compensation and guanxi, a type of informal personal relationship between people, on the objectivity of Chinese internal auditors. Given that the objectivity of internal auditors is essential for promoting financial reporting quality, it is important to investigate the effectiveness of internal audit functions, especially in emerging markets where the corporate governance mechanisms designed to promote objectivity are less mature.

Methodology/Approach

The research employs a 2 × 2 between participants experiment with 116 graduate accounting student participants.

Findings

After controlling for internal auditors’ ethicality, we find that close-guanxi between management and internal auditors and incentive compensation in the form of bonuses based upon meeting earnings targets both have the capacity to impair the objectivity of Chinese internal auditors. Participants were more tolerant of management’s attempts to manage earnings when there was close guanxi or bonus compensation. Further, compensation structure only influenced internal auditors’ support of management when guanxi was distant, but when there was close guanxi between internal auditors and management, internal auditors were unlikely to challenge management regardless of the compensation structure.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-78441-635-5

Keywords

To view the access options for this content please click here
Article
Publication date: 4 November 2014

Suman Basuroy, Kimberly C. Gleason and Yezen H. Kannan

The purpose of this article is to examine whether the design of chief executive officer (CEO) compensation generates incentives to engage in managerial behavior that…

Abstract

Purpose

The purpose of this article is to examine whether the design of chief executive officer (CEO) compensation generates incentives to engage in managerial behavior that enhances customer satisfaction and whether these incentives, in turn, lead to higher firm value.

Design/methodology/approach

A unique dataset combining customer satisfaction and executive compensation data was used, and the relationship between option sensitivity, customer satisfaction and performance was modeled using simultaneous equations modeling with industry and year fixed effects.

Findings

Findings suggest that CEO compensation plays an important role in explaining the variation in customer satisfaction and firm value. Specifically, CEO short-term compensation (salary or bonus) has no affect on customer satisfaction or firm value; the sensitivity of CEO wealth from long-term incentive compensation to stock price changes is positively related and also exhibits an inverted U-shaped relationship with customer satisfaction; the sensitivity of CEO wealth from long-term incentive compensation to stock price changes interacts negatively with CEO longevity and industry concentration but positively with advertising expenses in affecting customer satisfaction; the sensitivity of CEO wealth from long-term incentive compensation to both stock price changes and customer satisfaction positively affect firm value; and the sensitivity of CEO wealth from long-term incentive compensation to stock price changes interacts positively with customer satisfaction to affect firm value.

Research limitations/implications

This study suffers from several limitations. First, the sample is limited to firms with ACSI scores available. Second, this study is limited to only publicly traded firms, which limits our ability to generalize regarding customer satisfaction, option sensitivity and firm value.

Practical implications

This study has several important implications for researchers and managers. The first is that the corporate board appears to view investment in customer satisfaction as similar to an investment in other intangible assets or technology, in that they reward managers with a nonlinear payoff profile. To encourage managers to invest discretionary funds wisely, incentive compensation is important. Second, compensation committees of corporate boards should not allow the option sensitivity to reach extreme levels because, at some point, managers’ incentives appear to shift more toward short-term earnings objectives and away from investment in intangibles, which have a longer-term payoff. Third, if boards are concerned about customer satisfaction and market value, when designing compensation packages, they should shift their focus from the structure of pay to the sensitivity of pay to performance. The exception to this is that for CEOs with very long tenures (or for those close to retirement), high levels of option sensitivity may distort incentives away from a focus on customer satisfaction. Finally, our results indicate that strategies that enhance customer satisfaction provide an incremental benefit in terms of firm value, beyond incentive compensation strategies.

Social implications

The results indicate that a “stakeholder focus” which includes customers is value adding for shareholders as well. The results also imply that perhaps using a “balanced scorecard” approach to assessing performance in terms of customer satisfaction outcomes, or at least acknowledging the drives of customer satisfaction explicitly, could be an alternative to using highly sensitive incentive-based compensation when such compensation schemes are less desirable.

Originality/value

Prior research has found that the structure of fixed versus incentive-based compensation impacts customer satisfaction. However, this is one of the first papers to investigate the relationship between the sensitivity of CEO compensation and customer satisfaction. Findings have important implications for boards who seek to structure CEO pay so that CEOs have incentives to enact policies that benefit customers and, in turn, firm performance.

Details

Review of Accounting and Finance, vol. 13 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

To view the access options for this content please click here
Article
Publication date: 1 February 1993

Ahmed Riahi‐Belkaoui and Ellen Pavlik

The study developed and tested a model that attempts to describe the influence of ownership structure, diversification strategy, firm size and firm performance on CEO…

Abstract

The study developed and tested a model that attempts to describe the influence of ownership structure, diversification strategy, firm size and firm performance on CEO compensation. Results based on data from a cross‐sectional set of 216 Fortune 500 firms suggested that firm size, ownership structure and diversification strategy affect CEO compensation through the mediating effects of firm performance.

Details

Managerial Finance, vol. 19 no. 2
Type: Research Article
ISSN: 0307-4358

To view the access options for this content please click here
Book part
Publication date: 12 November 2016

Hao Liang, Luc Renneboog and Sunny Li Sun

We take a state-stewardship view on corporate governance and executive compensation in economies with strong political involvement, where state-appointed managers act as…

Abstract

Purpose

We take a state-stewardship view on corporate governance and executive compensation in economies with strong political involvement, where state-appointed managers act as responsible “stewards” rather than “agents” of the state.

Methodology/approach

We test this view on China and find that Chinese managers are remunerated not for maximizing equity value but for increasing the value of state-owned assets.

Findings

Managerial compensation depends on political connections and prestige, and on the firms’ contribution to political goals. These effects were attenuated since the market-oriented governance reform.

Research limitations/implications

Economic reform without reforming the human resources policies at the executive level enables the autocratic state to exert political power on corporate decision making, so as to ensure that firms’ business activities fulfill the state’s political objectives.

Practical implications

As a powerful social elite, the state-steward managers in China have the same interests as the state (the government), namely extracting rents that should adhere to the nation (which stands for the society at large or the collective private citizens).

Social implications

As China has been a communist country with a single ruling party for decades, the ideas of socialism still have a strong impact on how companies are run. The legitimacy of the elite’s privileged rights over private sectors is central to our question.

Originality/value

Chinese executive compensation stimulates not only the maximization of shareholder value but also the preservation of the state’s interests.

Details

The Political Economy of Chinese Finance
Type: Book
ISBN: 978-1-78560-957-2

Keywords

To view the access options for this content please click here
Article
Publication date: 11 April 2008

Nina T. Dorata and Steven T. Petra

This study seeks to examine whether CEO duality further exacerbates CEOs' motivation of self‐interest to engage in mergers and acquisitions to increase their compensation.

Abstract

Purpose

This study seeks to examine whether CEO duality further exacerbates CEOs' motivation of self‐interest to engage in mergers and acquisitions to increase their compensation.

Design/methodology/approach

Regression tests using CEO compensation as the dependent variable, and CEO duality, firm size and firm performance as independent test and control variables. The regression tests are used for various sub‐samples of the firms, those that merge and those that have CEO duality.

Findings

The results indicate that for merging firms CEO compensation is positively associated with firm size. However, this association is unaffected by CEO duality. For non‐merging firms, the results indicate that CEO compensation is positively associated with firm size and firm performance. CEO duality moderates the positive association between CEO compensation and firm performance.

Research limitations/implications

This study is limited to the extent that it does not observe the deliberations of compensation committees in their setting of CEO compensation, but only examines the outcomes of those deliberations. A future area of research is to examine compensation schemes of merger/acquisition CEOs in the context of other government structures, such as board independence and composition.

Practical implications

Shareholders who desire to keep CEO compensation levels positively associated with firm performance may consider supporting the separation of the positions of CEO and Chairperson of the Board.

Originality/value

This study contributes to the literature by concluding that governance structure influences CEO compensation schemes and CEOs of merging firms command higher compensation in spite of governance structure and firm performance.

Details

Managerial Finance, vol. 34 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article
Publication date: 12 February 2018

Seung Hee Choi and Samuel H. Szewczyk

When major reallocations of the firm’s assets are necessary, a balance in the corporate governance structure favoring the CEO can be a necessary condition for planning and…

Abstract

Purpose

When major reallocations of the firm’s assets are necessary, a balance in the corporate governance structure favoring the CEO can be a necessary condition for planning and initiating major strategic moves. The purpose of this paper is to examine firms making major acquisitions to identify corporate governance elements that are particular to undertaking major strategic initiatives.

Design/methodology/approach

The authors test the proposition that firms making major strategic acquisitions will exhibit a corporate governance structure that is different in a number of its governance elements from firms making other acquisition decisions. The authors categorize the elements of corporate governance structures into CEO characteristics, internal monitoring, external monitoring and CEO compensation.

Findings

The authors find the propensity of acquiring firms to make major strategic acquisitions is abetted by the CEO’s attributes and compensation, by the structure of the audit committee and compensation committee, and by the firm’s prior financial performance.

Originality/value

The analysis of firms making major acquisitions presents the corporate governance dynamics of an environment that is conducive to strategic risk taking.

Details

Managerial Finance, vol. 44 no. 2
Type: Research Article
ISSN: 0307-4358

Keywords

1 – 10 of over 24000