144 research outputs found
Performance-Based Long Term Incentive Compensation and Firm Performance
Awarding executives long-term incentive pay based on firm performance is often described as a natural way to improve firm performance. This brief uses an analytical approach to examine that proposed relationship. We first document the prevalence of performance-based long-term incentive (PB LTI) measures and the trends in the relative size of these measures compared to aggregate measures of compensation. We then compare the characteristics and performance of firms that have implemented a PB LTI measure in the past to those that have not. In order to understand the impact of PB LTI awards on firm performance, we separately assess the roles of the existence of the PB LTI measures, the relative size of the measures, and the type of PB LTI measure on firm performance
Compensation Consultants and Executive Pay (CRI 2009-010)
This chapter provides a review of the recent literature on compensation consultants and executive pay. Six major pay consulting firms dominate the market. These firms advise client firms about executive pay and frequently supply other services such as actuarial work. There is some evidence that CEO pay is higher in firms that use compensation consultants. However, the hypothesis that CEO pay is higher in firms whose consultants face potential conflicts of interest, such as cross-selling of other services, is not as empirically robust
Executive Compensation Consultants and CEO Pay
This Article surveys recent empirical studies on the relation between compensation consultants and CEO pay. The economic rationale for using executive compensation consultants is that they supply valuable data, information, and professional expertise to client firms. However, critics argue that the consultantâs independence might be compromised because of conflicts of interest arising from the cross selling of business services or because of the consultantâs desire to obtain repeat business. The emergent empirical evidence suggests that pay consultants are important in explaining executive compensation, although the findings are sometimes mixed and the precise effects of consultants on pay are yet to be fully understood. In addition, this Article provides some new evidence on the correlation between CEO pay and consultants using U.S. and U.K. data. Adopting a slightly different approach to prior studies, I show that there is a positive cross-section correlation between executive pay and compensation consultants. Conditional on the estimation strategy, the existing evidence supports the hypothesis that CEOs of U.K. firms using consultants receive higher pay than those that do not use compensation consultants. There is less evidence that firms facing conflicts of interest, such as supplying other business services, are associated with higher levels of CEO pay. However, the findings may be sensitive to the type of estimation methods employed, and addressing this concern is a challenge for future research. I also find little support for the hypothesis that firms switch consultants as a mechanism of increasing CEO pay. Again, interpreting the data is fraught with difficulties because of selection effects and the possibility of reverse causation. Finally, the recent Dodd-Frank Act significantly upgrades disclosure about executive compensation and compensation advisors. Future research on the efficacy of compensation consultants will undoubtedly take advantage of these new provisions. At present, it is difficult to unambiguously conclude that pay consultants simply promote executive interests at the expense of shareholders, or that pay outcomes and contracts are not optimal
Sharing Ownership via Employee Stock Ownership
Broad-based stock options, Employee ownership, Incentive compensation,
Executive Pay and Firm Performance: Methodological Considerations and Future Directions
This paper is an investigation of the pay-for-performance link in executive compensation. In particular we document main issues in the pay-performance debate and explain practical issues in setting pay as well as data issues including how pay is disclosed and how that has changed over time. We also provide a summary of the state of CEO pay levels and pay mix in 2009 using a sample of over 2,000 companies and describe main data sources for researchers. We also investigate what we believe to be at the root of fundamental confusion in the literature across disciplines â methodological issues. In exploring methodological issues, we focus on empirical specifications, causality, fixed-effects, first- differencing and instrumental variables issues. We then discuss two important but not yet well explored areas; international issues and compensation in nonprofits. We conclude by examining a series of research areas where further work can be done, within and across disciplines
Behavioral and Performance Consequences of U.S. Executive Equity Compensation and Ownership
Logic and some empirical findings suggest that the consequences of the level of executive ownership and the size of stock option grants have non-monotic relations to firm performance. The size of option grants now typical in the U.S. is likely to encourage an excessive level of risk taking. Stock options are not an effective means of increasing executive ownership and are generally less efficient than full-value grants when comparing opportunity cost to the company and initial psychological value to the executive. Implications for research and compensation design are noted.
IWS briefing, Winter 2007 Volume 7 Issue 1
[Excerpt] A newsletter on workplace issues and research from the School of Industrial and Labor Relations at Cornell University
IWS briefing, Summer 2007 Volume 7 Issue 2
[Excerpt] A newsletter on workplace issues and research from the School of Industrial and Labor Relations at Cornell University
WPĆYW PROGRAMĂW MOTYWACYJNYCH NA WYNIKI FINANSOWE BANKĂW
The paper presents âemployee stock optionâ (ESO) plans in selected European countries and in the United States. The purpose of the paper is to show how those programs influence the companyâs performance. To prove the outcome of the analysis presented in the paper, the author has analysed the data from a group of six banks from 2009 to 2010. Half of the banks in the group implemented the ESOs. The analysis was divided into two parts, one dealing with the financial result of the company, while the other focused on the manner of implementation of such programs and their influence on the share price of such companies in order to show how the market reacts to the introduction of ESOs. The conclusions are that banks that used ESOs are more profitable and bring higher returns in stock markets.W artykule przedstawiono programy opcji menedĆŒerskich funkcjonujÄ
ce w wybranych paĆstwach europejskich oraz w Stanach Zjednoczonych. ArtykuĆ ma na celu pokazanie wpĆywu wdroĆŒonych programĂłw na sytuacjÄ ekonomicznÄ
przedsiÄbiorstw. Celem potwierdzenia wynikĂłw przytoczonych w artykule badaĆ dotyczÄ
cych osiÄ
ganych przez przedsiÄbiorstwa stosujÄ
ce opcje menedĆŒerskie korzyĆci ekonomicznych przeprowadzono analizÄ grupy szeĆciu bankĂłw w latach 2009-2010. PoĆowÄ grupy stanowiĆy banki, ktĂłre wdroĆŒyĆy programy opcyjne dla swoich pracownikĂłw. Analiza dotyczyĆa osiÄ
gniÄtych przez banki wynikĂłw finansowych oraz oceny bankĂłw przez rynek na podstawie ksztaĆtujÄ
cych siÄ w latach 2009-2010 cen akcji. Wnioski wynikajÄ
ce z przeprowadzonego badania pozwalajÄ
stwierdziÄ, ĆŒe banki stosujÄ
ce programy motywacyjne oparte na opcjach osiÄ
gajÄ
lepsze wyniki niĆŒ banki, ktĂłre takich programĂłw nie stosujÄ
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