Synchronous and lagged relationships between CEO pay and performance of quality companies

© 2008, Emerald Group Publishing Limited. Purpose – This paper aims to examine the synchronous and lagged relationships between CEOs\u27 pay and the performance of a group of public companies that had won a very prestigious award: the Malcolm Baldrige National Quality Award (MBNQA). Design/methodology/approach – This study uses three rates of return to represent firm performance: return on assets, return on equity and holding period return. Regression analysis is used to determine the direction of causality between CEO pay and firm performance and the existence of lagged relationship between them. Findings – The findings indicate the existence of synchronous and lagged relationships between CEO pay and firm performance. However, the direction of causality is mainly from pay to performance, and not vice versa. Research limitations/implications – The results presented in this paper are limited by the small sample size of MBNQA winning companies. Although the award began in 1988, only a few companies won the award each year and many of them were not public companies. In addition, five companies won the award twice and one company won the award three times, which further reduces the sample size. Originality/value – This paper finds the existence of synchronous and lagged relationships between CEO pay and firm performance for a group of quality companies

The Impact Of Corporate Governance And The Sarbanes-Oxley Act On CEO Compensation

This paper examines the effects of corporate governance on CEO compensation in light of regulatory controls introduced by the Sarbanes-Oxley Act of 2002 (SOX).  The influence of economic and corporate governance variables on incentive-based CEO compensation are considered, using cross-section time-series panel data that includes multiple observations for the years 1999 to 2005.  As expected, sales, firm performance (returns), and CEO age were found to positively affect the incentive components of CEO compensation.  CEO duality, board size, and the percentage of outside directors had a significant influence on CEO compensation in the pre-SOX, but not post-SOX, period.  The influences of these three variables in the pre-SOX period were not in the expected directions. Stratification of our sample into two groups by size reveals similarities and differences between smaller and larger firms. For both groups, economic determinants are more dominant than corporate governance variables as determinants of incentive-based CEO compensation.  We find differences in the pattern and significance of variables between the smaller and larger firms, particularly for corporate governance variables, pre- and post-SOX. These results suggest that the effectiveness of corporate governance mechanisms may vary by size of company

Assessing managerial power theory: A meta-analytic approach to understanding the determinants of CEO compensation

Although studies about the determinants of CEO compensation are ubiquitous, the balance of evidence for one of the more controversial theoretical approaches, managerial power theory, remains inconclusive. The authors provide a meta-analysis of 219 U.S.-based studies, focusing on the relationships between indicators of managerial power and levels of CEO compensation and CEO pay-performance sensitivities. The results indicate that managerial power theory is well equipped for predicting core compensation variables such as total cash and total compensation but less so for predicting the sensitivity of pay to performance. In most situations where CEOs are expected to have power over the pay setting process, they receive significantly higher levels of total cash and total compensation. In contrast, where boards are expected to have more power, CEOs receive lower total cash and total compensation. In addition, powerful directors also appear to be able to establish tighter links between CEO compensation and firm performance and can accomplish this even in the face of powerful CEOs. The authors discuss the implications for theory and research regarding the determinants of executive compensation

Economic Conditions And The SECs Enforcement Process

This study analyzes enforcement activities of the U.S. Security and Exchange Commission (SEC) in conjunction with changes in economic conditions. Neoclassical regulatory theorists argue that regulators are pro-business during periods of economic downturn. However, within the securities market and the regulated reporting environments violations tend to increase during contraction periods. Therefore, more intense enforcement activities seem appropriate during such periods. The intensity of SEC enforcement activities, subject to economic conditions, is examined based on the number of litigation releases issued by the Commission over a twenty year (1972-1991) period. The test of regulatory behavior revealed that enforcement activities are more intense during economic downturns. Thus the theory that regulators exhibit pro-business behavior during economic contraction is not supported by the results of this study

The Effect of Marketing Mix on Purchasing Decision and Customer Satisfaction from Producing Cooperative Companies of Kuhdasht County

The objective of this study is to promote knowledge in country’s producing cooperatives and to examine and determine the probable relationship between quality, price, advertisement and method of distribution in cooperative producing companies in Kuhdasht County with decision of customers to purchase and determining the satisfaction of customers in 2010. Customers of cooperative producing companies in Kuhdasht form the population of this research. The sampling size of this field descriptive-correlative study was determined according to sampling formula of unlimited populations (n=20). The validity of the questionnaires was determined 98% using Cronbach test. Research findings shows that the customer satisfaction from purchasing the products of the mentioned companies is 2.10%, lower than expected average of 3%. This implies their low satisfaction. Therefore it can be concluded that that marketing strategies of producing cooperative companies in Kuhdasht couldn’t provide the necessary satisfaction for the customer causing the costumers lack of interest in purchasing the products of these companies. In other words, customer's satisfaction is subject to quality, price, advertisement and distribution variables which as intervention variables provide and supply the demand of the customers, leading to decisions to purchase from these companies