The Decoupling of CEO Pay and Performance: An Agency Theory Perspective

1989 ◽  
Vol 34 (2) ◽  
pp. 169 ◽  
Author(s):  
Henry L. Tosi ◽  
Luis R. Gomez-Mejia
Keyword(s):  
Agency Theory ◽  
Ceo Pay ◽  
And Performance

Social Embeddedness, Overt and Covert Power, and Their Effects on CEO Pay: An Empirical Examination Among Family Businesses in India

2000 ◽  
Vol 13 (4) ◽  
pp. 293-311 ◽  
Author(s):  
Rajaram Veliyath ◽  
Kannan Ramaswamy
Keyword(s):  
Agency Theory ◽  
Multinational Enterprises ◽  
Ceo Compensation ◽  
Developing Economies ◽  
Social Embeddedness ◽  
Cross Sectional ◽  
Empirical Examination ◽  
Firm Diversification ◽  
Ceo Pay ◽  
And Performance

The literature on CEO compensation reflects two common biases: (a) the dominant use of the agency theory perspective and (b) the almost exclusive use of U.S. and U.K samples. Agency theory views compensation as a consequence of the incentive contracts and the processes of corporate governance. However, little is known about the determinants of CEO compensation in developing countries. Considering that foreign direct investment of U.S. multinational enterprises increased 10-fold over the past decade, mostly in developing economies, there is a great need to understand the dynamics of pay setting in these foreign contexts. Overall, there is an imperative need to explore alternative theoretical perspectives as well as investigate nontraditional contexts to broaden existing theoretical premises. In an attempt to address this need, this study investigates the CEO's social embeddedness and overt and covert power as determinants of CEO pay in a sample of Indian family-controlled firms. Using a time-series, cross-sectional regression analysis, we find family shareholding and the percentage of inside directors on the board (identified as bases of overt power for the CEO) to be the predominant influences on CEO pay. By contrast, some of the identified bases of covert power, such as the CEO's tenure, age, education, and firm diversification, are not significant. Surprisingly, controls for firm size and performance also exhibit no influence on CEO pay. These findings offer a useful point of reference against which results from western studies can be compared to formulate more holistic theories of CEO pay.

Corporate Governance and Performance of Organizations

2018 ◽  
Vol 9 (5) ◽  
pp. 439-446
Author(s):  
Hamid Ait lemqeddem ◽  
◽  
Mounya Tomas ◽  
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Theoretical Foundation ◽  
Quantitative Approach ◽  
Governance Practices ◽  
Deductive Method ◽  
Private And Public ◽  
Is Theory ◽  
And Performance ◽  
Do So

There is renewed interest in the need to focus on corporate governance in an environment where it is a performance imperative for all small and large organizations, private and public, beginner or established.The purpose of this study is to demonstrate the place of corporate governance practices in organizations to ensure that the board, officers, and directors take action to protect shareholder interests and all stakeholders. It is important to focus on the effect of these practices on improving performance and competitiveness. To do so, we opted for the hypothetico-deductive method with a quantitative approach. Our theoretical foundation is theory is agency theory.

Analysis of the Nexus between CEO Pay and Performance of Non-Financial Listed Firms in Nigeria

2017 ◽  
Vol 29 (3) ◽  
pp. 429-445 ◽  
Author(s):  
Clement Olalekan Olaniyi ◽  
Olufemi Bodunde Obembe ◽  
Emmanuel Oluwole Oni
Keyword(s):  
Listed Firms ◽  
Ceo Pay ◽  
And Performance

Governance monitors or market rebels? Heterogeneity in shareholder activism

2018 ◽  
Vol 17 (3) ◽  
pp. 281-310
Author(s):  
Richard A Benton ◽  
Jihae You
Keyword(s):  
Social Movement ◽  
Agency Theory ◽  
Contextual Factors ◽  
Target Selection ◽  
Agency Problems ◽  
Shareholder Activism ◽  
Target Firms ◽  
External Governance ◽  
Performance Problems ◽  
And Performance

Agency theory is the dominant theory of shareholder activism and argues that activist investors function as external governance monitors. Agency theory predicts that activist investors will tend to target firms who exhibit governance and performance problems. However, given limited resources and time, activist investors must often decide between selecting targets with particularly strong agency and performance problems and those where their activism efforts are most likely to succeed. Social movement scholars point out that, in social movement contexts, the corporate opportunity structure affects when and where activism is likely to arise. We draw on insights from social movement scholarship and agency theory to advance a theory of heterogeneity in shareholder activism. We argue that an activist’s access to power and resources shapes its target selection, particularly the activist’s preference for targeting firms with greater agency problems or where contextual factors favor chances of success. Whereas more powerful activists are able to wield their power as effective governance monitors against firms with substantial agency problems, less powerful activists must strategically select targets of opportunity by choosing firms where contextual factors improve their odds of success. We test these propositions using an innovative relational approach that can simultaneously incorporate firm traits, activist identities, and endogenous dynamics.

Innovative Enterprise Solves the Agency Problem

2019 ◽  
pp. 156-191
Author(s):  
William Lazonick ◽  
Jang-Sup Shin
Keyword(s):  
Agency Theory ◽  
Hedge Fund ◽  
Innovation Theory ◽  
Long Term Effects ◽  
Business Corporation ◽  
Innovative Enterprise ◽  
And Performance ◽  
Short Termism ◽  
The U.S

This chapter uses innovation theory to provide both a general theoretical critique and a selective empirical critique of the use of agency theory to rationalize the looting of the U.S. business corporation as enhancing economic efficiency. It focuses on three empirical works, Bebchuk and Fried, Pay Without Performance (2004); Bebchuk, Brav, and Jiang, “The Long-Term Effects of Hedge-Fund Activism” (2015); and Fried and Wang, “Short-Termism and Capital Flows” (2017). The chapter contends that MSV ideology as promulgated by agency theorists has contributed to inferior corporate and economic performance. It then argues that, for analyzing the operation and performance of the economy, innovation theory should replace agency theory.

scholarly journals CEO pay in UK FTSE 100: pay inequality, board size and performance

2014 ◽  
Vol 22 (8-9) ◽  
pp. 712-731 ◽  
Author(s):  
William Patrick Forbes ◽  
Michael Pogue ◽  
Lynn Hodgkinson
Keyword(s):  
Board Size ◽  
Ceo Pay ◽  
Pay Inequality ◽  
And Performance

Examining Agency Theory in Training & Development

2011 ◽  
Vol 10 (4) ◽  
pp. 399-416 ◽  
Author(s):  
Ross E. Azevedo ◽  
Mesut Akdere
Keyword(s):  
Agency Theory ◽  
Performance Outcomes ◽  
Organizational Policy ◽  
Development Framework ◽  
Training Development ◽  
Self Interest ◽  
Effective Training ◽  
Management Literature ◽  
And Performance ◽  
Business And Management

Agency theory has been discussed widely in the business and management literature. However, to date there has been no investigation about its utility and implications for problems in training & development. Whereas organizations are still struggling to develop and implement effective training programs, there is little emphasis on the self-interest behaviors of the trainers and how these motivations may impede the training process. Agency theory can help inform our learning and understanding of possible outcomes in this scenario. Consequently, this article is the first to explore agency theory within the training & development framework and offers propositions for research and practice. Implications for organizational policy and performance outcomes are also discussed.

The continuing search for the Holy Grail

2018 ◽  
Vol 16 (1) ◽  
pp. 97-106
Author(s):  
Robert M. Wiseman ◽  
Hadi Faqihi
Keyword(s):  
Design Methodology ◽  
Three Dimensions ◽  
Multiple Stakeholders ◽  
Future Directions ◽  
Content Type ◽  
Current State ◽  
Novel Approach ◽  
Ceo Pay ◽  
And Performance

Purpose The purpose of this paper is to enrich the finding by Aguinis et al. (2018) that there is little overlap between the extremes of firm performance and the extremes of CEO pay using a novel approach to characterize the distribution of pay and performance. The authors aim to shift the focus of compensation researchers from fruitlessly trying to link pay to performance to theory-rich accounts of pay that take into consideration the idiosyncratically motivated and socially embedded nature of CEO compensation. Design/methodology/approach The authors’ approach in this commentary is conceptual. They synthesize compensation literature from different fields such as economics, finance, sociology, strategic management and corporate law, as well as the empirical findings from the focal paper to support their characterization of the current state of the literature and future directions it should take. Findings The authors synthesize discussion of CEO pay down to three dimensions of CEO responsibilities and motivations. They argue that a realistic pay design should take into account that CEOs have limited control over performance, they are accountable to multiple stakeholders and they are motivated by financial as well as nonfinancial incentives. Originality/value The commentary presents researchers with high-order framing of CEO pay that goes beyond debating over methodology or narrowly focusing on limited behavioral drivers of pay setting. Instead, the authors encourage researchers to take advantage of their three-legged framework to theorize about CEO pay.

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