Limiting Executive Compensation: The Case of CEOs Hired after the Imposition of 162(m)

2007 ◽  
Vol 22 (4) ◽  
pp. 599-621 ◽  
Author(s):  
Steven Balsam ◽  
David H. Ryan
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Chief Executive ◽  
Executive Pay ◽  
Internal Revenue ◽  
Compensation Package ◽  
Bonus Pay ◽  
Executive Officers

This study analyzes the effect of Internal Revenue Code section 162(m) on the compensation package of those chief executive officers (CEOs) hired after the imposition of this code section. Research documents that CEO compensation has increased dramatically since the imposition of section 162(m); yet, this research has not distinguished between the effects on the compensation of CEOs already in place when section 162(m) was imposed from those CEOs hired post-162(m) imposition. We focus our analysis on the compensation of CEOs hired after the imposition of section 162(m), because when firms hire a new CEO, they have a better opportunity to redesign the executive pay package. Consequently, we posit that section 162(m) will have its greatest effect when the affected companies change CEOs. Our analysis provides evidence that the increase in salary normally associated with the hiring of a new CEO has been mitigated and there has been an increase in the sensitivity of firm performance to bonus pay for CEOs appointed after 1994 in affected firms.

scholarly journals CEO Compensation and Firm Performance: The Role of ESG Transparency

2020 ◽  
Vol 4 (2) ◽  
pp. 278
Author(s):  
Chetna Rath ◽  
Florentina Kurniasari ◽  
Malabika Deo
Keyword(s):  
Firm Performance ◽  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Negative Relationship ◽  
Chief Executive ◽  
Long Run ◽  
Ceo Pay ◽  
Executive Officers ◽  
The Impact

Chief executive officers (CEOs) of environmental, social, and governance (ESG) firms are known to take lesser pay and engage themselves in corporate social responsibility activities to achieve the dual objective of the enhancement of firm’s performance as well as benefit for stakeholders in the long run. This study examines the role of ESG transparency in strengthening the impact of firm performance on total CEO pay in ESG firms. A panel of 67 firms for the period of 2014–2019 has been analyzed using the two-step system GMM model, with NSE Nifty 100 ESG Index as the data sample and ESG scores from Bloomberg database as a proxy for transparency. Findings reveal that environmental and governance disclosure scores have the potential to intensify the negative relationship between firm performance and CEO compensation, while social disclosure scores do not. In addition, various firm-specific, board-specific, and CEO-specific attributes have also been considered controls affecting remuneration. This paper contributes to the literature by exploring the effect of exhibiting ESG transparency and its nexus with CEO pay as well as firm performance.

scholarly journals Does Educational Background Affect CEO Compensation And Firm Performance?

2011 ◽  
Vol 27 (1) ◽  
Author(s):  
Terrance Jalbert ◽  
Kimberly Furumo ◽  
Mercedes Jalbert
Keyword(s):  
Firm Performance ◽  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Chief Executive ◽  
Educational Background ◽  
Government Officials ◽  
Select Group ◽  
Executive Officers ◽  
Educational Variables ◽  
Compensation Committees

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="color: black; mso-themecolor: text1;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">This paper examines the educational background of Chief Executive Officers (CEOs) from large U.S. firms. Forbes CEO compensation lists and Compustat data covering 500 or more firms annually are utilized in the analysis for the period 1997-2006.<span style="mso-spacerun: yes;">&nbsp; </span>Universities are ranked based on the number of graduates placed in top CEO positions and of the total compensation their graduates earn as CEO.<span style="mso-spacerun: yes;">&nbsp; </span>Results show a select group of schools educate a large proportion of top CEOs.<span style="mso-spacerun: yes;">&nbsp; </span>Harvard dominates the CEO market at all educational levels.<span style="mso-spacerun: yes;">&nbsp; </span>Results show low correlation between university placement rankings and compensation rankings.<span style="mso-spacerun: yes;">&nbsp; </span>Regressions on CEO compensation provide additional insights into CEO compensation determinants. Regressions of CEO educational variables on firm performance measures identify links between CEO education and firm performance.<span style="mso-spacerun: yes;">&nbsp; </span>This is the first known paper to examine CEO gender as a determinant of compensation and firm performance.<span style="mso-spacerun: yes;">&nbsp; </span>The evidence here provides hiring and compensation committees valuable information on appropriate hiring, retention and compensation strategies.<span style="mso-spacerun: yes;">&nbsp; </span>It also provides government officials additional insights for designing appropriate regulations.</span></span></span></p>

CEO Compensation and Acquired and Acquiring Companies in Large Corporate Acquisitions

GIS Business ◽  
2016 ◽  
Vol 11 (5) ◽  
pp. 01-13
Author(s):  
Simon Yang
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Relative Sensitivity ◽  
Matched Sample ◽  
Executive Pay ◽  
Corporate Acquisitions ◽  
Acquiring Firms ◽  
Managerial Power ◽  
To Receive

This paper examines the relative sensitivity of CEO compensation of both acquiring and acquired firms in the top 30 U.S. largest corporate acquisitions in each year for the period of 2003 to 2012. We find that total compensation and bonus granted to executive compensation for acquired companies, not acquiring companies, are significantly related to the amount of acquisition deal even after the size and firm performance are controlled for. Both acquiring and acquired CEOs are found to make the significantly higher compensation than the matched sample firms in the same industry and calendar year. We also find that executives with higher managerial power, as measured by a lower salary-based compensation mix, prior to a corporate acquisition are more likely to receive a higher executive pay in the year of acquisition. The association between executive compensation and managerial power seems to be stronger for acquired firms than for acquiring firms in corporate acquisition. Overall, our findings suggest that corporate acquisition has higher impacts on executive compensation for acquired firm CEOs than for acquiring firm CEOs.

scholarly journals CEO Monitoring and Board Effectiveness: Resolving the CEO Compensation Issue

2018 ◽  
Vol 21 (2) ◽  
pp. 123-134
Author(s):  
Chiraz Ben Ali ◽  
Frédéric Teulon
Keyword(s):  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Chief Executive ◽  
Board Governance ◽  
Board Effectiveness ◽  
Past Performance ◽  
Compensation Committee ◽  
Ceo Pay ◽  
Executive Officers ◽  
The Impact

This study examines the impact of board governance mechanisms on the pay of Chief Executive Officers (CEOs) using a sample of major French listed companies for the 2009–2011 period. The results show that CEO pay is negatively associated with the presence of a family CEO and positively associated with board size, busy directors, board meetings, and compensation committee independence. We provide further evidence that CEO compensation increases with firm size, and both present and past performance. Our study casts doubt on the effectiveness of formal board attributes in constraining CEO compensation.

scholarly journals The relationship between chief executive officer compensation and the size and industry of South African state-owned enterprises

2019 ◽  
Vol 17 ◽  
Author(s):  
Mariette Coetzee ◽  
Magda L. Bezuidenhout
Keyword(s):  
Chief Executive Officers ◽  
Ceo Compensation ◽  
African State ◽  
Chief Executive ◽  
Annual Reports ◽  
Performance Contracts ◽  
Ceo Pay ◽  
Managerial Implications ◽  
Executive Officers ◽  
The Relationship

Orientation: Concerns about exorbitant executive compensation are making headlines, because executives receive lucrative packages despite state-owned enterprises (SOEs) performing poorly. It appears as if chief executive officers (CEOs) are not being held accountable for the performance of the SOEs.Research purpose: The purpose of the study was to determine whether the size and the industry of an SOE had an impact on CEO compensation packages.Motivation for the study: A greater understanding of the relationship between CEO remuneration and the size and type of industry of SOEs would assist with the standardisation of CEO remuneration and linking CEO pay to SOE performance.Research approach/design and method: A multiple regression analysis on a pooled dataset of 162 panel observations was conducted over a 9-year period. Financial data of 18 SOEs were extracted from the McGregor BFA database and the annual reports of SOEs.Main findings: The findings show that the size of an SOE does not influence the total compensation of CEOs. However, larger SOEs pay larger bonuses due to these SOEs being in a stronger financial position to offer lucrative bonuses. CEO’s remuneration was aligned within certain industries.Practical/managerial implications: The findings emphasise the need to link CEO compensation with SOE performance. Standardisation in setting CEO compensation and implementing performance contracts should be considered.Contribution/value-add: The study confirms that CEO pay is not linked to performance and not justified when considering SOE size or industry.

The effects of global financial crisis on the relationship between CEO compensation and earnings management

2020 ◽  
Vol 28 (2) ◽  
pp. 389-408 ◽  
Author(s):  
Oheneba Assenso-Okofo ◽  
Muhammad Jahangir Ali ◽  
Kamran Ahmed
Keyword(s):  
Financial Crisis ◽  
Earnings Management ◽  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Global Financial Crisis ◽  
Chief Executive ◽  
Content Type ◽  
Multivariate Tests ◽  
Executive Officers ◽  
The Relationship

Purpose This paper aims to examine the effects of global financial crisis (GFC) on chief executive officers’ (CEO) compensation and earnings management relationship. Specifically, the authors examine whether the recent financial crisis had moderated the relationship between CEO bonus and discretionary accruals. Design/methodology/approach The authors use panel data for 1,800 firm-year observations (over a period of six years from 2005 to 2010) and use univariate and multivariate tests to test their hypothesis. The authors divide the period into pre-crisis, during-crisis and post-crisis periods to examine how the different financial crisis periods affect the relationship between CEO compensation and earnings management. Various alternative tests including endogeneity test suggest that the results are robust. Findings The authors’ multivariate results indicate that the relationship between CEO’ compensation and earnings management changes because of the GFC. Practical implications The findings, therefore, justify more monitoring and scrutiny to limit the existence of opportunistic managerial behaviour and for the appropriate designing of CEO compensation packages during abnormal economic circumstances. Originality/value So far as the authors’ knowledge goes, this is the first study which examines the relationship between CEO compensation and earnings management during GFC.

scholarly journals Nonmonetary Benefits, Quality of Life, and Executive Compensation

2013 ◽  
Vol 48 (1) ◽  
pp. 197-218 ◽  
Author(s):  
Xin Deng ◽  
Huasheng Gao
Keyword(s):  
Quality Of Life ◽  
Executive Compensation ◽  
Chief Executive Officers ◽  
Chief Executive ◽  
Living Environment ◽  
Nonmonetary Benefits ◽  
High Crime ◽  
Executive Officers ◽  
High Crime Rate

AbstractWe examine the effects of nonmonetary benefits on overall executive compensation from the perspective of the living environment at the firm headquarters. Companies in polluted, high crime rate, or otherwise unpleasant locations pay higher compensation to their chief executive officers (CEOs) than companies located in more livable locations. This premium in pay for quality of life is stronger when firms face tougher competition in the managerial labor market, when the CEO is hired from outside, and when the CEO has short-term career concerns. Overall, the geographic desirability of the corporate headquarters is an effective substitute for CEO monetary pay.

scholarly journals Does School Matter? An Empirical Analysis Of CEO Education, Compensation, And Firm Performance

2011 ◽  
Vol 1 (1) ◽  
Author(s):  
Terrance Jalbert ◽  
Ramesh Rao ◽  
Mercedes Jalbert
Keyword(s):  
Higher Education ◽  
Firm Performance ◽  
Empirical Analysis ◽  
Chief Executive Officers ◽  
Chief Executive ◽  
Educational Background ◽  
Graduate Degree ◽  
Graduate Degrees ◽  
Educational Backgrounds ◽  
Executive Officers

In this paper the educational background of the Chief Executive Officers (CEOs) of Large U.S. Firms are examined. Specifically, the educational background of CEOs from large U.S. firms, as identified in the Forbes 800 Compensation List, are examined. Information concerning the number of Chief Executive Officers that received their undergraduate and graduate degrees from 463 institutes of higher education are compiled. We find that most CEOs have an undergraduate degree, while about half possess a graduate degree. The results indicate that there are preferred educational backgrounds for selection as the CEO of a major corporation. We also examine how the educational background of the CEO is related to the CEOs total compensation. The evidence indicates that those CEOs that do not have a degree earn significantly more than those CEOs that do have a college degree. We find little evidence that the school attended affects the compensation that the CEO receives. Finally, we examine firm ROA and Tobins Q based on the educational background of the CEO. We find an association between possession of a degree as well as where the degree was earned and the ROA and Tobins Q of the firm.

CEO Compensation and Acquired and Acquiring Companies in Large Corporate Acquisitions

GIS Business ◽  
2017 ◽  
Vol 12 (2) ◽  
pp. 01-13
Author(s):  
Simon Yang
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Relative Sensitivity ◽  
Matched Sample ◽  
Executive Pay ◽  
Corporate Acquisitions ◽  
Acquiring Firms ◽  
Managerial Power ◽  
To Receive

This paper examines the relative sensitivity of CEO compensation of both acquiring and acquired firms in the top 30 U.S. largest corporate acquisitions in each year for the period of 2003 to 2012. We find that total compensation and bonus granted to executive compensation for acquired companies, not acquiring companies, are significantly related to the amount of acquisition deal even after the size and firm performance are controlled for. Both acquiring and acquired CEOs are found to make the significantly higher compensation than the matched sample firms in the same industry and calendar year. We also find that executives with higher managerial power, as measured by a lower salary-based compensation mix, prior to a corporate acquisition are more likely to receive a higher executive pay in the year of acquisition. The association between executive compensation and managerial power seems to be stronger for acquired firms than for acquiring firms in corporate acquisition. Overall, our findings suggest that corporate acquisition has higher impacts on executive compensation for acquired firm CEOs than for acquiring firm CEOs.

Benchmark on themselves: CEO-directors’ influence on the CEO compensation

2019 ◽  
Vol 45 (7) ◽  
pp. 810-826
Author(s):  
Bill Francis ◽  
Iftekhar Hasan ◽  
Yun Zhu
Keyword(s):  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Design Procedure ◽  
Chief Executive ◽  
Data Availability ◽  
Outside Directors ◽  
Content Type ◽  
Public Firms ◽  
Executive Officers ◽  
Compensation Design

Purpose The purpose of this paper is to examine whether or not the chief executive officers’ (CEO) compensation is affected by the compensation of the outside directors sitting on their board, who are also CEOs of other firms. Design/methodology/approach The authors collect CEOs’ and CEO-directors’ compensation data from Execucomp. The authors then match the CEO-directors’ compensation with appointing firms’ CEO compensation and financial statements, from Execucomp and Compustat, respectively. The sample contains 7,561 firm-year observations from 1996 to 2010, with 1,213 distinct S&P 1500 firms and 1,563 distinct CEO-directors. The authors use ordinary least squared method with firm and year fixed effect in most of the analysis. Findings With both annual and excess compensation, the authors find strong evidence that CEO-directors’ compensation is related to the compensation of the CEO. Causally, when CEO-director overturns his/her excess compensation from negative to positive, the CEO is more likely to have similar upward change in the following year, while more interestingly, the opposite does not hold. These findings are persistent over time and remain robust to various additional tests. Research limitations/implications Due to the data availability, this paper investigates the S&P 1500 public firms. Originality/value It is the first work that investigates the link between board members’ external compensation and the CEO’s compensation. This sheds new light on the process of the CEO’s compensation design, in regard to both the information being utilized in the design procedure and the CEO’s influence on his/her own compensation. Second, this paper adds additional evidence to the choice of peer groups in compensation construction. Third, the authors enhance the understanding of the role of CEO-directors. The authors show that CEO-directors may be the ally of CEO, and help in justifying CEO’s compensation, especially when underpaid.

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