The Equilibrium Relationships between Performance-Based Pay, Performance, and the Commission and Detection of Fraudulent Misreporting

ABSTRACT We develop an agency model in which managerial information manipulation creates pooling and entails ex post costs internal and/or external to the firm. We examine the implications of the strategic interactions between shareholders (who set internal governance and managerial incentive compensation), the manager (who exerts effort and reports on its outcome), and an external regulatory authority or RA (who investigates for fraud and levies penalties ex post). When the RA cannot pre-commit to an ex post investigation strategy, a fraudulent equilibrium obtains if the firm's internal governance costs are sufficiently high. Consistent with (so far fairly scant) post-SOX empirical evidence, but the opposite of the implications of signal-jamming models and equilibria with pre-commitment, the model implies an increase in minimum internal governance standards or ex post fraud penalties (as with SOX) results in decreased equilibrium pay-for-performance sensitivity and firm performance.

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Public Enforcement

10.1093/oxfordhb/9780198743682.013.8 ◽

2015 ◽

Author(s):

Amanda M. Rose

Keyword(s):

Corporate Governance ◽

Broad Spectrum ◽

Company Law ◽

Minority Shareholders ◽

Public Enforcement ◽

Internal Governance ◽

Governance Framework ◽

Ex Post

This chapter examines issues relating to corporate governance in closely held corporations. It begins by describing the typical characteristics of closely held corporations, with particular emphasis on shareholder involvement in management, number of shareholders, share transfers, market for shares, and the broad spectrum of shareholders and applications. It then considers common governance issues and conflicts in closely held corporations and proceeds with a discussion of the governance framework for such corporations consisting of company law, model articles, articles of association, shareholder agreements, and corporate governance guidelines. It also explores the internal governance and management of closely held corporations, the governance of share transfer restrictions, and provisions for shareholder withdrawal and expulsion. The chapter concludes with an analysis of shareholder conflicts, especially oppression by majority shareholders and ex-post opportunism by minority shareholders, and how they are governed in closely held corporations.

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The effect of analyst coverage on CEO compensation structure: evidence from the S & P 1500

Managerial Finance ◽

10.1108/mf-10-2014-0273 ◽

2016 ◽

Vol 42 (3) ◽

pp. 191-211 ◽

Cited By ~ 1

Author(s):

Shin-Rong Shiah-Hou

Keyword(s):

Ceo Compensation ◽

Pay For Performance ◽

Firm Risk ◽

Publicly Traded ◽

Internal Governance ◽

Analyst Coverage ◽

Content Type ◽

Compensation Structure ◽

Institutional Holdings

Purpose – What is the role of analysts in reducing agency problems and information asymmetry between stockholders and managers? The purpose of this paper is to confirm the analyst’s role by examining his or her influence on CEO compensation structure. Design/methodology/approach – The major population for this study consists of publicly traded corporations of the S & P 1500 for which data on CEO compensation is available from Standard & Poor’s Execucomp database, along with the proxy statements of these firms. Regression analysis is used to test hypotheses about the effect of analyst coverage on CEO compensation. Findings – The evidence shows that CEOs of firms with greater analyst coverage or higher analyst coverage quality (analyst coverage index) have higher pay-for-performance (Delta), more compensation incentives to increase firm risk (Vega), more total compensation, and more excess compensation. Even after controlling for the effect of other types of corporate governance, including internal governance and institutional holdings, analysts’ activities still have an incremental effect on CEO compensation structure. Practical implications – The authors findings may be useful to investors who use analyst coverage to evaluate the firm’s CEO compensation, as it suggests that investors may reference the information about analyst coverage of firms to craft appropriate CEO compensation structures. Originality/value – The authors results contribute by showing that the extra effect of analyst activities on CEO compensation structure exists, even after controlling for other types of governance mechanisms, such as internal governance and institutional investors’ holdings.

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Comparative Corporate Governance in Closely Held Corporations

10.1093/oxfordhb/9780198743682.013.5 ◽

2016 ◽

Cited By ~ 1

Author(s):

Holger Fleischer

Keyword(s):

Corporate Governance ◽

Broad Spectrum ◽

Company Law ◽

Minority Shareholders ◽

Internal Governance ◽

Governance Framework ◽

Ex Post ◽

Comparative Corporate Governance

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Symmetry in Bargaining and Efficient Contracts under Asymmetric Information

Studies in Microeconomics ◽

10.1177/2321022217713094 ◽

2017 ◽

Vol 5 (2) ◽

pp. 132-142

Author(s):

Arijit Sen

Keyword(s):

Asymmetric Information ◽

Incomplete Information ◽

Agency Model ◽

Ex Post ◽

Interdependent Values ◽

Model Contract

This paper shows that in a Spencian agency model, contract determination through alternating-offer bargaining can generate efficient outcomes. This result holds in parameter regimes in which the screening equilibrium (where the uninformed principal makes a take-it-or-leave-it offer to the agent) and the signalling equilibrium (where the informed agent makes a take-it-or-leave-it offer to the principal) both predict inefficient contracts. More generally, this paper clarifies that in negotiations under incomplete information involving interdependent values, symmetry in the bargaining protocol can limit the extent of allocation inefficiencies and can lead to ex post efficient agreements.

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A Comparative Analysis of the Incentive Systems under Taylorism and Fordism

HISTORY OF ECONOMIC THOUGHT AND POLICY ◽

10.3280/spe2008-002003 ◽

2009 ◽

pp. 65-89

Author(s):

Maurizio Lisciandra

Keyword(s):

Historical Analysis ◽

Organisational Change ◽

Jel Classification ◽

Compensation Scheme ◽

Payment Systems ◽

Incentive Systems ◽

Agency Model ◽

Ex Post ◽

Labour Contracts

- Lliterature on Taylorism has surprisingly ignored the role of its payment systems, while the results achieved on Ford's five-dollar day programme appear contradictory and sometimes isolated from the organisational change simultaneously undertaken. I seek to fill these theoretical gaps. I provide a historical analysis of the relevant features of Taylorism and Fordism and analyse a simple agency model with a linear compensation scheme to account for the observed differences in payment systems between Taylor's performance-related pay and Ford's fixed wages. I show how the ex-post observed divergence may be interpreted in terms of technology-related differences in i) responsiveness of effort to incentives and ii) responsiveness of proceeds to effort. JEL classification: D8; J3; J41; L2. Keywords: Taylorism; Fordism; agency theory; labour contracts; incentives.

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Demographical Impact of Pay for Performance on Accountability Reinforcement a Tool for Employee Retention

Management Insight - The Journal of Incisive Analysers ◽

10.21844/mijia.v13i02.11270 ◽

2018 ◽

Vol 13 (02) ◽

Author(s):

Neelam Kaushal

Keyword(s):

Private Sector ◽

Performance Appraisal ◽

Employee Retention ◽

Banking Sector ◽

Pay For Performance ◽

Focal Point ◽

Employee Performance ◽

Executive Staff ◽

Performance Based Pay ◽

The Impact

This study is not only significant in the banking sector but also matter of focal point in other industries. To battle in current environment private sector banks, are making changes in their work systems. They are changing their organization structure in order to turn into more prompt in response to the shifting environment which includes competitors also. Employees become a very imperative source of competitive advantage for an association. To attract and to keep hold of employees, an organization needs to have resonance compensation strategy supported by other HR functions. This study observed the impact of demographical factors on PBP as an accountability reinforcement means for attaining organisational concert for employee retention using the condition in selected private sector banks of Haryana. The major rationale of the study was to determine the force of PRP on the accountability reinforcement of workforce and consequently, on the accomplishment of organisational goals. Here also employee’s aspiration regarding Performance Related Pay has been measured. In each and every one, 475 respondents got part in the assessment. The sample included 100 executive staff and 375 operational level staff. The key research mechanism was the survey for which questionnaire has been used. Further one-way ANOVA table was exercised to test the core hypotheses. The consequence of the research given away that the outcome of performance-based pay on employee performance is nominal and the motivational cause of merit pay is regularly rounded by influenced performance appraisal. The main inadequacy of the study is that it could not cover up all banks, due to time and economic constraints. In this high opinion, the explanation of the results of the research should not be over-simplified.

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CEO Compensation in Korea: Is It Different Than in the US? A Comparison between Korean Non-Life Insurance Firms and US Property-Liability Insurance Firms

International Journal of Financial Studies ◽

10.3390/ijfs9040061 ◽

2021 ◽

Vol 9 (4) ◽

pp. 61

Author(s):

Sangyong Han ◽

Hyejeong Mun

Keyword(s):

Life Insurance ◽

Ceo Compensation ◽

Pay For Performance ◽

Level Structure ◽

Shareholder Value ◽

Insurance Companies ◽

Executive Pay ◽

Life Insurers ◽

Insurance Firms ◽

Performance Based Pay

This study investigates the level, structure, and pay-for-performance relationship of CEO compensation in Korean non-life insurance companies. We find that seniority plays an important role in setting CEO compensation practices and that performance-based pay, such as bonus, is more effective than base salary in enhancing shareholder value for Korean non-life insurers. Unlike previous studies that show that international differences in executive pay have been diminished considerably since the 2000s, our evidence shows that there is a remarkable difference in CEO compensation between Korean non-life insurers and U.S. property-liability insurers. Furthermore, we provide evidence that the pay-performance relationship is weaker in Korean non-life insurance companies relative to US counterparts, suggesting that it is necessary for Korean non-life insurers to tie performance-based compensation more closely to shareholder value in the design of CEO compensation.

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The Efficiency Costs of Dividend Taxation with Managerial Firms*

The Economic Journal ◽

10.1093/ej/ueab064 ◽

2021 ◽

Author(s):

Marko Koethenbuerger ◽

Michael E Stimmelmayr

Keyword(s):

Corporate Finance ◽

Empirical Work ◽

Efficiency Analysis ◽

Incentive Pay ◽

Managerial Incentive ◽

Agency Model ◽

Corporate Agency ◽

Dividend Taxation ◽

Efficiency Cost ◽

Agency Models

Abstract The paper provides a positive and efficiency analysis of dividend taxation in a corporate agency model with a costly managerial effort. Unlike existing (agency) models, this model is consistent with empirical work in corporate finance and able to predict empirically observed investment responses to dividend taxation. In addition, we show that investment changes are not sufficient to infer, first, the efficiency cost of dividend taxation and, second, the financing regime underlying firms’ investments. We provide a testable implication that allows to empirically uncover the source of investment finance by comparing investment responses to dividend taxes and managerial incentive pay.

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