scholarly journals Governance structure and the weighting of performance measures in CEO compensation

2006 ◽  
Vol 11 (4) ◽  
pp. 463-493 ◽  
Author(s):  
Antonio Davila ◽  
Fernando Penalva
Keyword(s):  
Performance Measures ◽  
Ceo Compensation ◽  
Governance Structure

Board Committee Overlap and the Use of Earnings in CEO Compensation Contracts

2022 ◽  
Author(s):  
Mary Ellen Carter ◽  
Luann J. Lynch ◽  
Melissa A. Martin
Keyword(s):  
Earnings Management ◽  
Performance Measures ◽  
Ceo Compensation ◽  
Incentive Contracts ◽  
Audit Committees ◽  
Implicit Relation ◽  
Compensation Contracts ◽  
Potential Alternative ◽  
Larger Sample

Using proxy statement data describing the terms of compensation contracts, we examine how overlapping membership between compensation and audit committees influences the use of earnings metrics in compensation. Although research predicts that such overlap could either increase or decrease the reliance on earnings, we find that firms with overlapping directors rely less on earnings-based performance measures in incentive contracts without altering the overall level of performance-contingent cash bonuses. In addition, we provide evidence that firms substitute earnings measures with measures less subject to earnings management. Our findings are robust to potential alternative explanations, extend to an implicit relation between earnings and compensation for a larger sample, and are not driven by the tendency toward an overlapping committee structure more broadly. This paper was accepted by Suraj Srinivasan, accounting.

CEO pay sensitivities in innovative firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Raghavan J. Iyengar ◽  
Malavika Sundararajan
Keyword(s):  
Firm Performance ◽  
Performance Measures ◽  
Ceo Compensation ◽  
Critical Role ◽  
Positive Association ◽  
Executive Pay ◽  
Content Type ◽  
Accounting Performance ◽  
Innovative Firms ◽  
Compensation Committees

PurposeThis study aims to investigate whether compensation committees provide the chief executive officers (CEOs) with incentives to undertake “income-decreasing” but potentially “value-enhancing” innovation expenditures. The authors specifically analyze pay–performance relationships for innovative firms relative to all other firms. This study is critical because innovation is expensive and has uncertain outcomes.Design/methodology/approachUsing alternative accounting performance measures and market performance measures, the authors estimate an econometric model of CEO compensation in innovative firms that incorporates the interaction of endogenous innovation and firm performance.FindingsThe authors document an incremental positive association between changes in accounting performance measures and CEO compensation changes in innovative firms relative to other firms. This sensitivity of executive pay to firm performance is higher for firms that innovate. These results support the hypothesis that compensation committees provide incentives to carry out risky innovation by tying executive compensation more closely to firm performance. This finding survives a battery of sensitivity tests.Practical implicationsThe implications of this study are significant. Capital needs to support risky research and development investments (Tidd and Besant, 2018; Baldwin and Johnson, 1995) form the basis of innovative firms' operations. Considering these expenses, if CEOs, who play a critical role in the scanning, adapting and implementing innovative needs in a firm, are not protected and compensated for making risky choices, the entire investment itself will be threatened. Hence, the findings reiterate and support earlier findings that speak to the importance of compensating CEOs to make high-risk investments that will lead to long-term economic and financial gains for the firm when the innovative behaviors result in competitive market shares and profits.Originality/valueThe original work is related to the investigation of pay–performance sensitivity in the presence of innovation, which has not been fully investigated in prior literature.

Corporate governance, CEO compensation and tax aggressiveness

2016 ◽  
Vol 15 (4) ◽  
pp. 445-462 ◽  
Author(s):  
Khamoussi Halioui ◽  
Souhir Neifar ◽  
Fouad Ben Abdelaziz
Keyword(s):  
Corporate Governance ◽  
Ceo Compensation ◽  
Great Influence ◽  
Audit Fees ◽  
Governance Structure ◽  
Corporate Governance Structure ◽  
Content Type ◽  
Tax Aggressiveness ◽  
Negative Relation ◽  
Interactive Decision Making

Purpose The purpose of this paper is to examine the effect of corporate governance structure and CEO compensation on the level of tax aggressiveness. Design/methodology/approach This work analyzes a sample of 471 observations of 100 companies listed on the NASDAQ 100 for the period 2008-2012. It uses a fixed-effect panel model to analyze the effect of different model variables on the tax aggressiveness level. Findings The main finding of this study is the great influence of corporate governance structure and CEO compensation on reducing tax aggressiveness. Indeed, it finds a significant negative relation between board size, CEO salary, CEO stock options and tax aggressiveness. In addition, the study reveals that there is a direct negative relation between CEO duality, tax fees and tax aggressiveness. Research limitations/implications The study was conducted using robust methods to test the effect of corporate governance structure and CEO compensation on tax aggressiveness level. The generalized least squares method was used to fit panel data and overcome heteroscedasticity and autocorrelation problems. The aim of the study was to prove the great effect of both corporate governance structure and CEO compensation on reducing tax aggressiveness. As this study was based on data from American companies, the results cannot be generalized to all contexts. Originality/value This paper differs from previous work and tests the effect of corporate governance structure, CEO compensation, CEO characteristics and audit fees on tax aggressiveness. The findings of this study will enrich the literature on tax aggressiveness by suggesting that corporate governance structure and CEO compensation can significantly limit tax aggressiveness behavior. Therefore, shareholders must be aware of these two variables. They need to limit tax aggressiveness behavior, as it is usually accompanied by rent diversion, as reported by Desai and Dharmapala (2006). Therefore, these findings will be helpful to investors, managers and regulators because they have implications for the interactive decision-making process.

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