Adverse ruling raises Argentine YPF compensation risk

Headline ARGENTINA: Adverse ruling raises YPF compensation risk

Executive compensation and compensation risk: evidence from technology firms

PurposeThe purpose of this research is to investigate factors that contribute to technology firms paying higher compensation than non-technology firms, and why the mix of compensation at technology firms is different than the compensation packages at non-technology firms.Design/methodology/approachThis research used a sample of 1,009 firm-year observations for the five-year period from 2001 to 2005 and random-effects regression models.FindingsIt was found that the total compensation paid to the CEOs of technology firms is higher than the total compensation paid to the CEOs of non-technology firms, and that the value of the stock options granted to the former is greater than the value of the stock options granted to the latter.Research limitations/implicationsThe results are largely consistent with the labour market efficiency perspective. The higher compensation paid to CEOs in technology firms seems to be commensurate with the higher compensation risk that CEOs in technology firms bear.Practical implicationsCompensation designers should consider both the benefits and costs of granting stock and stock options to executives. An increased portion of stock options definitely aligns the interests of shareholders and CEOs together, and could maximize the retentive effect if CEOs have a significant amount of their wealth in unvested in-the-money options.Social implicationsConsistent with the literature, a CEO could earn much higher pay if he or she also serves as the chair of the board of directors. Practically, firms do not require all governance mechanisms. They just require one set of suitable governance mechanisms.Originality/valueThis paper is the first to investigate factors that contribute to technology firms paying higher compensation than non-technology firms, and that do explain why the mix of compensation at technology firms is different than the compensation packages at non-technology firms.

Is top management team-supply chain manager interaction the missing link? An analysis of risk-bearing antecedents for supply chain managers

Purpose Supply chain managers (SC managers) may make less than optimal decisions for the firm when facing compensation and employment risks. The purpose of this paper is to study two relevant factors (target setting and strategic importance of the supply chain function) that may drive SC managers to perceive more or less risk to their welfare. Design/methodology/approach The study combines survey data from 133 firms with secondary data in order to reduce source bias and enhance the validity of results. The authors also conducted interviews with supply chain and human resources managers. Findings The results show that top managers can alter SC managers’ perceived risks. Ambitious targets drive compensation risk but not employment risk. The supply chain function’s strategic importance, on the other hand, decreases employment risk but increases compensation risk. Research limitations/implications The authors emphasize two ways that the top management team (TMT) influences SC managers’ perceived personal welfare but acknowledge that there may be others factors. Due to the topic sensitivity, the authors could not collect data on all variables (e.g. individual characteristics) that may affect risk perception. The findings are based on Spanish firms and may not be generalized to other contexts. Practical implications This research proposes three suggestions. First, compensation and employment risks should be considered separately when designing compensation and evaluation systems. Second, appropriate performance targets may put compensation risk in a reasonable range that is neither too high to prevent risky-yet-beneficial decisions nor too low to allow nonfeasance. Third, escalating the supply chain’s strategic importance effectively offsets employment risk. Originality/value Scholars have repeatedly shown the negative outcomes of SC managers’ perceived compensation and employment risks. Yet, little attention has been given to their antecedents. The study explores two relevant antecedents and provides integrative empirical evidence regarding actions top leaders can take to manage SC managers’ perceived risk and subsequently enhance firm performance.

Hedging Executive Compensation Risk through Investment Banks

ABSTRACT Allowing CEOs to hedge the risk in the compensation contracts their firms give them has been controversial because such hedging allows the executives to undo some of the incentive effects of those contracts; it also results in a divergence between the compensation firms pay their senior executives and the compensation those executives effectively receive. We analyze these personal hedging activities of CEOs and identify when firms may gain or lose by allowing or prohibiting such hedging. We also describe variations in CEOs' demands for various compensation hedges, and how firms will restructure their CEOs' compensation contracts in anticipation that the CEOs will engage in such hedging.