Foreign competition and executive compensation in the manufacturing industry - a comparison between Germany and the U.S.

In this study we use import penetration as a proxy for foreign competition in order to empirically analyze (1) the impact of foreign competition on managerial compensation, (2) differences in the impact between Germany and the U.S. and (3) whether the impact of import penetration is driven by implied efficiency effects. We use data from the manufacturing industry covering the period from 1984-2010 for Germany respectively 1992-2011 for the U.S. and apply system GMM in order to solve potential endogeneity problems. It turns out that foreign competition leads to an increase of average per capita executive compensation in both countries. The impact of foreign competition on payperformance sensitivity differs between the U.S. and Germany. A differentiation between imported intermediates (efficient sourcing strategy) and final inputs (competition) reveals that the impact of import penetration is not biased by efficiency effects

Does codetermination affect the composition of variable versus fixed parts of executive compensation?

Contrary to previous literature we hypothesize that interests of labor may well – like that of shareholders – aim at securing the long-run survival of the firm. Consequently, employee representatives on the supervisory board could well have an interest in increasing incentive-based compensation to avoid excessive risk taking and short-run orientated decisions. We compile unique panel data on executive compensation over the periods 2006 to 2011 for 405 listed companies and use a Hausman-Taylor approach to estimate the effect of codetermination on the compensation design. Finally, codetermination has a significantly positive effect on performance-based components of compensation, which supports our hypothesis

Corporate governance in the private and public sector

Corporate governance in Germany experienced a growing relevance in both the private and public sectors. Therefore, the focus of this dissertation lies on the evaluation of the effectiveness of corporate governance instruments in both sectors. However, whereas in the private sector the general goal of corporate governance is to motivate managers in order to increase the wealth of the corporation, in the public sector the goal is rather to meet performance objectives in an efficient and effective manner. Accordingly, analyzing effectiveness of corporate governance instruments in private respectively public sectors will differ from each other: Regarding the private sector, the main focus lies on the question whether corporate governance instruments indeed lead to a successful alignment of shareholder’s and manager’s interests. As the alignment of interests is predominantly provided by monetary incentives, this dissertation (chapter 2 to 4) empirically focuses on the impact of three corporate governance mechanisms (foreign competition, the implementation of mandatory disclosure obligations, and German codetermination) on level and design of executive compensation. By showing that (1) a high degree of foreign competition increases managerial pay incentives (U.S. and Germany), (2) stronger disclosure obligations have a leveling effect in particular on inappropriate high remuneration levels and (3) labor’s interest is similar to shareholder’s and thus increases managerial pay incentives in cases of codetermination, one might conclude that the considered private sector instruments succeed in improving corporate governance. According to the new public management approach the general goal of corporate governance in the public sector is rather focusing on efficiency and effectivity. Thus, the corresponding empirical analysis in chapter 5 focuses on the evaluation of efficiency and quality in local public services using the example of German employment offices. Additionally in this context, chapter 5 provides insights on the impact of several new public management characteristics on efficiency and quality in German employment offices. It turns out that the effectiveness of some new public management indicators did not reveal the expected impact: They neither lead to an increase in job agency’s efficiency nor quality. Furthermore a job agency’s efficiency deviates between 3 to 35% from cost minimum and there is no general trade-off between efficiency and quality

Foreign competition and executive compensation in the manufacturing industry – A comparison between Germany and the U.S.

In this study we use import penetration as a proxy for foreign competition in order to empirically analyze (1) the impact of foreign competition on managerial compensation, (2) differences in the impact between Germany and the U.S and (3) whether the impact of import penetration is driven by implied efficiency effects. We use data from the manufacturing industry covering the period from 1984-2010 for Germany respectively 1992-2011 for the U.S and apply system GMM in order to solve potential endogeneity problems. It turns out that foreign competition leads to an increase of average per capita executive compensation in both countries. The impact of foreign competition on payperformance sensitivity differs between the US and Germany. A differentiation between imported intermediates (efficient sourcing strategy) and final inputs (competition) reveals that the impact of import penetration is not biased by efficiency effects

Foreign competition and executive compensation in the manufacturing industry - a comparison between Germany and the U.S.

In this study we use import penetration as a proxy for foreign competition in order to empirically analyze (1) the impact of foreign competition on managerial compensation, (2) differences in the impact between Germany and the U.S. and (3) whether the impact of import penetration is driven by implied efficiency effects. We use data from the manufacturing industry covering the period from 1984-2010 for Germany respectively 1992-2011 for the U.S. and apply system GMM in order to solve potential endogeneity problems. It turns out that foreign competition leads to an increase of average per capita executive compensation in both countries. The impact of foreign competition on payperformance sensitivity differs between the U.S. and Germany. A differentiation between imported intermediates (efficient sourcing strategy) and final inputs (competition) reveals that the impact of import penetration is not biased by efficiency effects