Executive Compensation in Contemporary Corporate Governance: Why Pay for Performance is a Flawed Methodology

2005 ◽  
Author(s):  
James A. McConvill
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Pay For Performance

Positive Corporate Governance and its Implications for Executive Compensation

2005 ◽  
Vol 6 (12) ◽  
pp. 1777-1804 ◽  
Author(s):  
James McConvill
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Best Practice ◽  
Pay For Performance ◽  
Negative Perception ◽  
High Profile ◽  
Exponential Increase ◽  
Self Interest ◽  
The Common ◽  
Common Perception

As a result of a series of high-profile corporate collapses worldwide, along with regular reporting of shareholder money being spent on corporate jets, executive golf days and increasingly excessive executive compensation arrangements, the common perception is that the executives of our largest corporations are driven by self-interest with little regard for what is best for the corporation. Due to this negative perception, there has been an exponential increase in the amount of laws, rules and guidelines setting in place a heightened standard of corporate governance best practice. Without such regulation, it is believed, another collapse or scandal is inevitable. In this article, I dispute this reasoning. In my view if we embrace “positive corporate governance”, in which the positive strengths and virtues of company executives are emphasised, we can move towards an environment in which heavy regulation is replaced by positive corporate norms inside the corporation. I then apply my approach of positive corporate governance to address one of the most significant issues confronting corporate regulation at present- how to deal with the rapid increase in executive compensation in our largest corporations. I suggest that the dominant methodology of pay for performance is ultimately flawed.

scholarly journals Asymmetric pay-for-performance and corporate governance in the market downturn

2007 ◽  
Vol 4 (4) ◽  
pp. 193-205
Author(s):  
Tung-Hsiao Yang
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Executive Compensation ◽  
Pay For Performance ◽  
Market Performance ◽  
Debt Ratio ◽  
Supportive Evidence ◽  
Market Conditions ◽  
Managerial Power ◽  
Market Changes

This paper examines the pay-for-performance, corporate governance, and their connection by analyzing the change of executive compensation when the stock market changes from upturn to downturn. We provide the evidence to support the managerial power explanation for the change in executive compensation. We find the asymmetric pay-for-performance and corporate governance in different market conditions and different firm’s market performance. In addition, the outperformed firms reward CEO with more cash-based compensation and less stock-based compensation in the market downturn. Therefore, we conclude that the CEOs of outperformed firms have stronger managerial power than those of underperformed firms. We also find supportive evidence of our conclusion that the firms with lower debt ratio, smaller number of board meetings, and the presence of interlocked relationship have higher probability to be the outperformed firms. This evidence is consistent with the prediction of managerial power approach

scholarly journals Transaksi Pihak Berelasi: Kompensasi Manajemen Kunci, Kinerja Akuntansi, dan Multiple Large Shareholders

2020 ◽  
Vol 20 (3) ◽  
pp. 877
Author(s):  
Gandy Wahyu Maulana Zulma ◽  
Fitri Chairunnisa ◽  
Azolla Degita Azis
Keyword(s):  
Corporate Governance ◽  
Performance Evaluation ◽  
Executive Compensation ◽  
Financial Accounting ◽  
Executive Management ◽  
Accounting Performance ◽  
Large Shareholders ◽  
Research Findings ◽  
Research Period ◽  
Positive Effect

The aim of this study is to examine whether multiple large shareholders held by the company can affect the relation between accounting performance and executive compensation, using panel data of all publicly company in Indonesia (except financialand mining industries) with the research period 2017-2019. The result shows that the existence of 2nd largest shareholders that owns more than 10% stocks and also if the board has representation from 2nd largest shareholders in the company, it can reduce the positive effect of accounting performance to executive compensation. This research findings could be as an additional literature in financial accounting and corporate governance area, and also for practitioners in Indonesia that if a firm has good controlling function from multiple large shareholders, it can reduce the opportunistic discretion from executive management if the company has performance evaluation based on earnings.

scholarly journals The role of corporate governance in executive compensation system

2015 ◽  
Vol 12 (4) ◽  
pp. 467-479
Author(s):  
Yusuf Mohammed Nulla
Keyword(s):  
New York ◽  
Corporate Governance ◽  
Executive Compensation ◽  
Research Study ◽  
Stock Exchange ◽  
Pearson Correlation ◽  
New York Stock Exchange ◽  
Statistical Regression ◽  
Toronto Stock Exchange ◽  
York Stock Exchange

This research study explores the relationship between the executive compensation and corporate governance among the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX/S&P) companies from 2005 to 2010. The quantitative research method was selected for this research study. The eighty largest companies from the New York Stock Exchange and the Toronto Stock Exchange were selected. The random sample method was used to select the two populations from each index. The research question for this research study was: is there a relationship between CEO cash compensation and corporate governance among the Toronto Stock Exchange and the New York Stock Exchange companies. The four statistical regression models found that there was a weak relationship between corporate governance and executive compensation among the TSX/S&P and the NYSE populations. Also, the Pearson correlation results indicated that the corporate governance has a minimal role towards the determination of the executive compensation

scholarly journals Downward wage rigidity in American technology firms

2018 ◽  
Vol 15 (4-1) ◽  
pp. 181-190
Author(s):  
Xiaoying Chen ◽  
Jasmine Yur-Austin
Keyword(s):  
Corporate Governance ◽  
Pay For Performance ◽  
Business Leaders ◽  
Wage Rigidity ◽  
Venture Capitalists ◽  
Technology Firms ◽  
Corporate Governance Mechanisms ◽  
And Control ◽  
Dot Com

This study reviews the role of various corporate governance mechanisms to pay for performance in American technology firms. Compared to traditional business leaders, CEOs in technology firms possess stronger power for negotiating with shareholders; such power theoretically lowers the chance of interest conflicts between management and control but may increase CEOs’ wage rigidity during business downturns, especially in firms with poor corporate governance. We evaluate ownership structure; board composition; and the existence of independent compensation committees throughout the dot-com bubble and bubble-burst periods. We aim to examine during the business downturn period whether these CEOs cut their compensation effectively or exercise their negotiation power to protect their own benefit. Our empirical results provide strong evidence that given poor firm performance, CEOs with weak corporate governance negotiate higher cash-based pay rather than reduce their compensations. However, we find that venture capitalists play an important role in monitoring CEOs and revising compensation.

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