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The purpose of this study is to examine whether chief executive officers’ (CEOs’) stock-based compensation has any relationship with disclosure of high proprietary information.

Drawing on agency and proprietary cost theory, this study examines whether compensating CEOs based on equity value through the grants of stock option and restricted stock will affect different firms with high proprietary costs versus general costs of disclosures. The authors further explore the cross-sectional variation on the relationship between stock-based compensation and disclosures of high proprietary cost information. In particular, the authors examine certain circumstances under which stock-based compensation has a stronger effect in discouraging managers to make disclosures of product-related information. This study conducts an empirical investigation on the relationship by using hand-collected data on the product-related disclosures of biotechnology firms and by developing new disclosure indices to capture the product developments in the preclinical and clinical stages.

The authors find that on average, managers’ stock-based compensation does not have any significant relationship with the proxy of high proprietary disclosure index. More importantly, the authors find that managers with more equity-based compensation (in the total pay) make fewer disclosures of high proprietary cost information when they have a stronger need to protect such information. Specifically, the authors find a negative relationship between equity-based compensation and managers’ disclosure of high proprietary cost information when their firms’ product development is in early stage, when the corporate board mainly consists of directors with lack of sufficient knowledge on technology, and when firms are a leader in an industry in terms of market share.

The authors acknowledge two limitations of the current study. First, the authors cannot completely rule out the possibility that the results are still subject to endogeneity issues such as reverse causality or omitted correlated variables even though the authors control for other important variables that affect disclosures and granting of stock-based compensation (including firm size, leverage, analyst following, institutional ownership and corporate governance) and use the lagged variable of stock-based compensation in the regression model. Second, given that the authors examine a small sample (only 10 per cent of firms in the biotechnology industry) due to the required hand-collection of product-related information, the generalizability of the results may be limited.

The study contributes to the literature in two important ways. First, the findings can add to the literature on the effect of stock-based compensation on managers’ disclosures. While previous studies suggest that compensating via stock options and restricted stocks can incentivize managers in enhancing firm disclosures in general (e.g. Nagar et al., 2003), the authors provide evidence suggesting that it may not always be the case. When disclosing information involves high proprietary cost, stock-based compensation can sometimes motivate managers not to reveal information. The study also complements Erkens (2011), who finds that firms offer stock-based compensation to their managers as an attempt to prevent the leakage of research and development (R&D)-related information to competitors. Second, the study can contribute to the extant literature that examines the importance of proprietary costs on firms’ disclosure decisions. The authors attempt to respond to the call for more research in this area (Beyer et al., 2010) by focusing on one specific industry, the biotech industry and by using a novel proxy for the proprietary costs based on the stage of product development for a drug-related product in that industry. As it has been challenging for researchers to properly measure proprietary costs of disclosures, the setting of the biotech industry provides a particularly strong empirical identification to potentially pinpoint the proprietary costs.

In this paper, the impact of stock-based compensation and further the joint effects of stock-based compensation and investor sentiment on pension discount rate choice is examined.

The hypotheses is tested using fixed effects models and instrumental variable analysis where pension discount rate is the dependent variable, and stock-based compensation and investor sentiment are our variables of interest.

It was found that pension discount rate is negatively associated with managers' stock-based compensation. Further analysis indicates that managers with larger stock-based compensation tend to adjust down their pension discount rates in higher (smaller) degree, responding to high (low) investor sentiment.

The findings provide important insights into how managers use pension discount rates to engage in earnings management. Understanding these relationships has implications for interpreting pension numbers reported in the financial statements and designing pension accounting rules that minimize the possibility that managers take advantage of the complexity associated with pension accounting to influence the reported earnings and executive compensation. Moreover, the findings suggest the need for increased attention from boards of directors, auditors and regulators to reported pension liabilities and service costs, especially for firms paying higher proportion of stock-based compensation to managers and during periods of high investor sentiment.

The findings contribute to the extant literature by identifying the joint impacts of stock-based compensation and investor sentiment as incentives for pension discount rate manipulation. The empirical results of this study also have important implications for corporate governance and regulation.

The purpose of this article is to examine if certain board characteristics have an impact on the total remuneration of top management and the ratio of stock-based remuneration to total top-management remuneration.

The study draws on data from the largest public Canadian companies, the constituents of the TSX/60 index. The study controls for firm size and profitability.

The authors concludes that total remuneration of top management is directly linked to board-member total remuneration and the board average number of director-tenure years. The study also shows that the ratio of stock-based to total top-management remuneration is positively affected by the percentage of independent directors, total remuneration of board directors, the ratio of stock-based remuneration of directors to their total remuneration and the average number of tenure years of the board of directors.

If regulators are determined to curb the excesses in top-management remuneration by means of promoting boards with certain characteristics, they should implement measures facilitating the control of directors’ remuneration and tenure, to discourage cronyistic behavior. Good corporate governance requires that the board act as a counterbalance to top management, ensuring that a substantial percentage of top-executive total compensation is variable, and not fixed. According to our findings, the boards that are the most likely to hold managerial avoidance of variable pay in check are those favoring director independence, variable director remuneration and longer director tenures.

The present article examines specifically the latter aspect, namely, the role of board characteristics (independence, size, compensation, board director ownership and tenure, etc.) in the determination of top-management compensation. This relationship is important because it allows us to further the analysis of corporate governance. If the above-mentioned traits of boards have a meaningful relationship with the compensation of the top management, one might conclude that certain practices in the composition of boards could influence good corporate governance practices. This is relevant for regulatory agencies, for investors and for corporations.

The article adds to the extant literature in a number of ways. Firstly, it considers the role of the traits of the board in the determination of the compensation of the top-management teams, and not only of the chief executive officer, as is the focus of previous literature. Secondly, the article focuses on the power interplay between boards and managers, and, more particularly, on the ability of boards to be an effective mechanism of corporate governance. Finally, the article examines the potential impact of board traits in the determination of top-management compensation in the context of Canadian firms, a subject that has received less attention from academic research, which has mostly concentrated on analyzing the issue in the US context.

This paper aims to present an interview carried out by Stephen Denning, who asks Roger L. Martin, the author of the recent explosive book Fixing the Game and Dean of Rotman School of Management at the University of Toronto, to explain why the private sector's 35‐year addiction to “maximizing shareholder value” has been disastrous for shareholders, for employees, the personal lives of executives, for the economy and for society at large.

In the interview Martin outlines the forces at work that preserve a dysfunctional system of maximizing the return for shareholders instead of focusing on customer value.

The paper reveals that there are many special interests that are devoted to maintaining the shareholder value doctrine, even at the risk of the survival of the firm.

Executives who mouth the shareholder value mantra need to realize that they are playing a game they cannot win on behalf of faceless, nameless shareholders who behave unilaterally and capriciously.

The paper reveals Martin's advice for private‐sector leaders who want to get back to doing real business, which is: focus on activities that provide value to customers and stop playing with earnings to hit Wall Street's consensus number.

The purpose of this paper is to investigate the policy consequences of expensing stock‐based compensation in Taiwan.

Data were collected on listed firms from 2006 to 2008 and a goodness‐of‐fit of accounting earnings valuation model was used to investigate the incremental information content of expensing stock‐based compensation. In addition, two sensitivity indexes were used to investigate the sensitivity between compensation and firm performance before and after income statement recognition of stock‐based compensation.

It was found that the association between earnings and abnormal returns is stronger after expensing compensation. In addition, the relationship between compensation variables, especially stock compensation, and firm performance is stronger after 2008, indicating that expensing compensation reinforces the relationship between compensation and performance.

The findings suggest that disclosure and recognition are not substitutes. The findings also have implications for standard setters and for investors attempting to mitigate managers' self‐interested behavior.

The accounting treatment of employee stock‐based compensation is a controversial issue among academics, regulators, managers, auditors, and investors. This paper investigates the incremental information content of the new accounting standard and explores whether the relationship between compensation and firm performance has become more transparent than before.

This study examines how cash and stock bonus compensations influence top executives to allocate a firm's resources to fixed intangible assets investment and the extent to which this relationship is conditional on executives' ownership, firm growth, internal cash flow and leverage.

Using data from 213 non-financial and non-utility UK FTSE 350 firms for the period 2007–2015, generating a total of 1,748 firm-year observations, panel econometric methods are employed to test the authors’ model.

The authors observe that executives' cash bonus compensation positively impacts fixed intangible assets investment. However, executives' stock bonus compensation has a negative and significant influence on fixed intangible assets. The authors further observe that executives either cash bonus or stock bonus crucially invest more in fixed intangible assets when the firm has a growth potential. Also, both cash bonus and stock bonus executives in firms with lower internal cash flow spend less on fixed intangible assets. Similar results are also observed for those stock bonus-motivated executives with an increase in fixed intangible assets for low leverage firms but a decrease for high leverage ones.

A key limitation of this study is its concentration on a single country (United Kingdom). Thus, future studies can expand the focus of this study by looking at it from the perspective of multiple countries.

The practical relevance of the study results is that firms with high growth opportunity in fixed intangible assets activity can use more cash bonus compensation (risk-avoiding incentive) to induce corporate executives to invest more in such activity. This finding is particularly important given the increasing appetite of firms in this knowledge-based economy to create expansion through fixed intangible assets investment. That is, for firms to increase fixed intangible assets investment, this study suggests that executive cash bonus compensation cannot be ignored.

While this paper builds on the classic Q theory of investment literature, it is the first – to the best of the authors’ knowledge – to explore how cash and stock bonus compensations influence top executives to allocate a firm's resources to fixed intangible assets investment and the extent to which this relationship is conditional on executives' ownership, firm growth, internal cash flow and leverage.

This study aims to investigate the effect of cash versus equity compensation on audit committee decision-making after the Public Companies Oversight Board’s 2007 censure of Deloitte.

Using a sample of 2,588 firms, this paper uses two different compensation measurements to empirically examine the effect of audit committee compensation on decision-making.

The authors find that audit committee compensation effects the post-censure decision-making of Deloitte’s clients. The results support the hypothesis that cash compensation paid to audit committees influences audit committee members to retain their auditors post-censure. Additionally, there is some evidence to support the hypothesis that equity compensation increases the propensity to switch auditors post-censure.

This study will be of interest to regulators, policymakers and researchers as it provides further evidence in the area of audit committee decision-making and the effect of cash and stock compensation paid to audit committee members.

This study provides empirical evidence of the association between audit committee compensation and audit committee decision-making by investigating the effect of cash-based compensation and stock-based compensation on audit committee decision-making.

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

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.

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.

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.

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

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.

Explains the concept of the investment set (IOS: i.e. chances to invest for expansion, new products, cost reduction etc.) and its effects on firm value. Reviews previous research on the theoretical relationships between IOS and optimal contracting resulting from shareholder/debtholder conflict, agency costs and performance measurement problems; and empirical research on its links with company policy on financing, dividends and compensation. Goes on to discuss research on measuring IOS by using various proxies; and summarizes the main findings.

Relates previous research on the importance of age in decision‐making to Fama and Jensen’s (1983) ideas on decision management, develops hypotheses on the age of managers and the use of stock‐based compensation in companies with long time horizons (i.e. growth companies) and tests them on 1979‐1987 data for a sample of US firms. Explains the methodology used and presents the results, which show that these firms tend to have younger subordinate executives (but not younger CEOs) and to use less stock‐based compensation the younger these executives are. Suggests this is because younger executives effectively extend the time horizon of older CEOs, thus reducing the need to do this through the compensation package.