The Effect of Suitability between Business Strategy and Executive Compensation on Corporate Performance

2017 ◽  
Vol 26 (6) ◽  
pp. 45-72
Author(s):  
Yu-Jin Kim ◽  
Ji-Yeun Hong
Keyword(s):  
Executive Compensation ◽  
Business Strategy ◽  
Corporate Performance

Optimal Executive Compensation versus Managerial Power: A Review of Lucian Bebchuk and Jesse Fried's Pay without Performance: The Unfulfilled Promise of Executive Compensation

2007 ◽  
Vol 45 (2) ◽  
pp. 419-428 ◽  
Author(s):  
Michael S Weisbach
Keyword(s):  
Executive Compensation ◽  
Effective Potential ◽  
Risk Taking ◽  
Corporate Performance ◽  
Policy Changes ◽  
Standard View ◽  
Compensation Systems ◽  
Managerial Power ◽  
Positive Perspective ◽  
Normative Perspective

This essay reviews Lucian A. Bebchuk and Jesse M. Fried's Pay without Performance: The Unfulfilled Promise of Executive Compensation. Bebchuk and Fried criticize the standard view of executive compensation, in which executives negotiate contracts with shareholders that provide incentives that motivate them to maximize the shareholders' welfare. In contrast, Bebchuk and Fried argue that executive compensation is more consistent with executives who control their own boards and who maximize their own compensation subject to an “outrage constraint.” They provide a host of evidence consistent with this alternative viewpoint. The book can be evaluated from both positive and normative perspectives. From a positive perspective, much of the evidence they present, especially about the camouflage and risk-taking aspects of executive compensation systems, is fairly persuasive. However, from a normative perspective, the book conveys the idea that policy changes can dramatically improve executive compensation systems and consequently overall corporate performance. It is unclear to me how effective potential reforms designed to achieve such changes are likely to be in practice.

scholarly journals Independent Director, Executives Compensation and Corporate Performance-Correcting Self-Selection Bias by Matching Methods

2016 ◽  
Vol 8 (8) ◽  
pp. 156
Author(s):  
Yuan Chang ◽  
Pang-Tien Lieu
Keyword(s):  
Executive Compensation ◽  
Selection Bias ◽  
Corporate Performance ◽  
Stock Exchange ◽  
Sample Selection ◽  
Board Independence ◽  
Independent Director ◽  
Economic Consequence ◽  
Self Selection ◽  
Two Step Estimation

Based on data of listed companies on Taiwan Stock Exchange (TWSE) through 2001~2011, this paper examines whether board independence has effects on executive compensation and corporate performance. Existing studies lacked of considering self-selection of board independence in evaluating the effects of board independence on economic consequence. This may incur estimation bias because systematic factors determining firm’s introducing independent director also have influences on economic consequence. While Heckman (1979)’s two-step estimation addressed selection duo to unobservables, this paper employs propensity score matching (PSM) from Rosenbaum and Rubin (1983, 1985a,b) to address sample selection duo to observables, and forms two groups of samples, namely, firms with independent director and firms without independent director but share similar characteristics with the former. Empirical evidence from regression estimation shows divergent outcomes under before-matching versus after-matching samples. Before matching, greater degree of board independence is associated with higher profitability and higher level of total and average executive compensation. After matching, outperformance as well as overpay on executive compensation of firm with greater board independence is vanished. After controlling selection bias duo to observables versus unobservables, our evidence concludes that greater board independence is uncorrelated with greater corporate performance and executive compensation overpay.

scholarly journals Self-interest or win-win: Determinants of executive compensation in China

2013 ◽  
Vol 10 (2) ◽  
pp. 121-127
Author(s):  
Zhen Chen ◽  
Fei Guo
Keyword(s):  
Executive Compensation ◽  
Agency Theory ◽  
Corporate Performance ◽  
Listed Companies ◽  
Listed Firms ◽  
Chinese Listed Companies ◽  
Self Interest

This paper studies the determinants of executive compensation in listed firms in China between 2002 and 2005. There is significantly positive elasticity of compensation to scale. Moreover, corporate performance is positively related to the elasticity of compensation to scale. We find that both agency theory and managerialism hold true in Chinese listed companies. Compensation contract is the result of the game by stockholders and managers

scholarly journals The Impact of Firm Performance on Executive Compensation in France

2017 ◽  
Vol 8 (2) ◽  
pp. 63-69 ◽  
Author(s):  
Amarou Yamina ◽  
Bensaid Mohamed
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Executive Compensation ◽  
Corporate Performance ◽  
Variable Part ◽  
Accounting Performance ◽  
Enterprise Level ◽  
Improved Performance ◽  
The Impact ◽  
The Relationship

Abstract The purpose of this article is to model the executive compensation in France. From a sample of 90 companies included in the SBF 120 over 2004, we examine whether there is a significant link between the overall executive compensation and corporate performance, and then determine the relationship between the fixed and variable part of the compensation with performance. Our findings highlight in particular the level of total executive compensation that is linked with relatively improved performance. And clearer, the pay of executive increases with the increase of financial performance, whereas, the bonus depends on level of accounting performance. The grant of options to executive is relatively linked to the financial performance of the enterprise level.

Sign in / Sign up

Export Citation Format

Share Document