scholarly journals Framed! The Failure of Traditional Agency Cost Explanations for Executive Pay Practices

2017 ◽  
Author(s):  
Bryce C. Tingle
Keyword(s):  
Corporate Governance ◽  
Best Practices ◽  
Executive Compensation ◽  
Empirical Evidence ◽  
Real World ◽  
Agency Cost ◽  
Board Independence ◽  
Executive Pay ◽  
History Of ◽  
Research Findings

This is the second article in a series exploring the empirical evidence arising from the increasing use of certain executive compensation best practices. The first article, “How Good Are Our ‘Best Practices’ When It Comes to Executive Compensation?” summarizes research findings that these best practices are responsible for most of the growth in executive compensation, and lead to suboptimal corporate performance. It also suggests that the best practices currently in widespread use contradict practices that are often very helpful to directors in setting appropriate incentives in real world circumstances.This article goes on to argue that failures in executive compensation are the result, not of overly powerful CEOs confronting supine boards, but rather of directors and management earnestly striving to follow bad “best practices” promulgated by the corporate governance industry. This can be seen in: (1) the pattern of cause and effect distinguishable in the history of changing North American and British pay practices; (2) the link between these questionable pay practices and various measures of board independence and managerial weakness; and (3) the increasing use of these pay practices in circumstances of increased shareholder power. The most obvious solution is to increase board autonomy in setting pay. Regulatory steps for doing so lay close at hand, and in some cases have been discussed for years.

scholarly journals Transaksi Pihak Berelasi: Kompensasi Manajemen Kunci, Kinerja Akuntansi, dan Multiple Large Shareholders

2020 ◽  
Vol 20 (3) ◽  
pp. 877
Author(s):  
Gandy Wahyu Maulana Zulma ◽  
Fitri Chairunnisa ◽  
Azolla Degita Azis
Keyword(s):  
Corporate Governance ◽  
Performance Evaluation ◽  
Executive Compensation ◽  
Financial Accounting ◽  
Executive Management ◽  
Accounting Performance ◽  
Large Shareholders ◽  
Research Findings ◽  
Research Period ◽  
Positive Effect

The aim of this study is to examine whether multiple large shareholders held by the company can affect the relation between accounting performance and executive compensation, using panel data of all publicly company in Indonesia (except financialand mining industries) with the research period 2017-2019. The result shows that the existence of 2nd largest shareholders that owns more than 10% stocks and also if the board has representation from 2nd largest shareholders in the company, it can reduce the positive effect of accounting performance to executive compensation. This research findings could be as an additional literature in financial accounting and corporate governance area, and also for practitioners in Indonesia that if a firm has good controlling function from multiple large shareholders, it can reduce the opportunistic discretion from executive management if the company has performance evaluation based on earnings.

scholarly journals TATA KELOLA DAN KINERJA KEUANGAN BADAN USAHA MILIK NEGARA (BUMN) GO PUBLIC PERIODE 2014-2018

2021 ◽  
Vol 10 (1) ◽  
pp. 82-101
Author(s):  
Andika Dwi Pradito ◽  
Axel Giovanni ◽  
Devi Wahyu Utami
Keyword(s):  
Corporate Governance ◽  
Linear Regression ◽  
Financial Performance ◽  
Empirical Evidence ◽  
Audit Committee ◽  
Stock Exchange ◽  
Analytical Tool ◽  
Board Independence ◽  
Government Ownership ◽  
Board Size

Abstrak: Tata Kelola Dan Kinerja Keuangan Badan Usaha Milik Negara (BUMN) Go Public Periode 2014-2018. Penelitian ini bertujuan untuk memberikan bukti empiris mengenai pengaruh tata kelola perusahaan terhadap kinerja keuangan Badan Usaha Milik Negara (BUMN) yang terdaftar di Bursa Efek Indonesia (BEI) selama periode 2014-2018. Sampel penelitian yang memenuhi kriteria berjumlah 12 Badan Usaha Milik Negara (BUMN). Alat analisis yang digunakan adalah regresi linear. Hasil penelitian memberikan bukti mengenai urgensi komite audit dalam tata kelola perusahaan. Penelitian ini juga menunjukan bahwa board size, board independence serta kepemilikan pemerintah tidak memiliki peran dalam menjelaskan variabilitas kinerja keuangan Badan Usaha Milik Negara (BUMN).Kata kunci: Badan Usaha Milik Negara (BUMN), kinerja keuangan, tata kelola perusahaanAbstract: Governance and Financial Performance of State-Owned Enterprises (SOEs) Go Public Period 2014-2018. This study aims to provide empirical evidence regarding the effect of corporate governance on the financial performance of State-Owned Enterprises (SOEs) listed on the Indonesia Stock Exchange (IDX) during the 2014-2018 period. Research samples that met the criteria totaled 12 State-Owned Enterprises (BUMN). The analytical tool used is linear regression. The results of the study provide evidence of the urgency of the audit committee in corporate governance. This study also shows that board size, board independence, and government ownership do not have a role in explaining the variability in the financial performance of SOEs.Keywords: corporate governance, financial performance, state-owned enterprises (SOEs)

scholarly journals A Literature Review of the Perspectives of CEO Pay: An Analysis of Issues and Controversies

2018 ◽  
Vol 8 (4) ◽  
pp. 44
Author(s):  
Faitira Manuere ◽  
Precious Hove
Keyword(s):  
Corporate Governance ◽  
Literature Review ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Executive Pay ◽  
The Core ◽  
Good Corporate Governance ◽  
Ceo Pay ◽  
Conceptual Background

The purpose of this paper is to review the literature on various theories that are used in organisations today to determine executive compensation. This paper analyses the relevance of the theories that are used to determine CEO compensation in modern corporations. The paper makes an attempt to review extensively the literature on CEO compensation. This paper looks at the concerns of sixteen theories of executive compensation. This paper further analyses the special features that are associated with CEO pay. These features help us to understand the problems that experts on executive pay experience when they try to define the exact CEO pay when compared to other rewards that are non financial. The drivers of executive pay are quantified and qualified in order to provide the conceptual background needed to understand the core factors that determine executive pay. Therefore the role of institutional investors in driving managerial salary is explored in detail. Finally, the effects of firm size and good corporate governance on executive pay are carefully analysed.

Culture and Law in Corporate Governance

2015 ◽  
Author(s):  
Amir N. Licht
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Cultural Analysis ◽  
Corporate Law ◽  
Cultural Dimensions ◽  
Dividend Distribution ◽  
The Board Of Directors ◽  
Research Findings ◽  
Corporate Social ◽  
The Relationship

This chapter explores the relationship between culture and law, especially corporate law, and its implications for corporate governance. It begins with an overview of the basic concepts in cultural analysis as well as prevalent theories of cultural dimensions and of social networks as social capital. It then summarizes research findings regarding the consequences of culture for corporate governance on issues ranging from executive compensation to legal transplants and the objectives of the corporation (corporate social responsibility). It also discusses relations with investors and other stakeholders by way of disclosure and dividend distribution, along with the operation, composition, and network structure of the board of directors. Finally, the chapter considers how the relationship between culture and law affects diversity and persistence in corporate governance.

Shariah monitoring, agency cost and fund performance in Malaysian mutual funds

2020 ◽  
Vol 11 (5) ◽  
pp. 945-972
Author(s):  
Mohd Fikri Sofi ◽  
M.H. Yahya
Keyword(s):  
Corporate Governance ◽  
Empirical Evidence ◽  
Mutual Funds ◽  
Agency Costs ◽  
Fund Performance ◽  
Agency Cost ◽  
Advisory Panel ◽  
Data Set ◽  
Content Type ◽  
Shariah Governance

Purpose This paper aims to examine the effect of Shariah Advisory Panel (SAP) on both the level of agency cost and fund performance against conventional corporate governance, within corporate and Shariah governance settings, between Shariah and conventional mutual fund (CMF), in an emerging economy of Malaysia during the period 2008-2015. Design/methodology/approach Panel data regression is appropriately used within corporate governance research because of empirical issues of unobserved heterogeneity effects to avoid spurious evidence. The secondary data of 172 CMFs and 80 Shariah mutual funds are gathered hand-collected from annual reports and master prospectuses for the purpose of analysis between the period 2008 and 2015, generating 2,016 fund-year observations. Findings SAP is found to have a positive effect on agency costs. Consequently, it leads to empirical evidence that substantiates a negative and marginally significant association with fund performance when designated by accounting measure. Thus, the Shariah monitoring proxy is not a good mechanism for controlling agency costs inconsistent with performance maximizing (agency cost minimizing) outcomes. Research limitations/implications The unique data set of mutual funds used in this research may restrict the generalization of the findings unless mentioned and explained specifically the data characteristics. The single proxy for Shariah monitoring could be better off by having a list of different measures. Practical implications The paper highlights and suggests a consistent improvement in regulation that could be performed by policymakers pertaining to the non-trivial additional cost of implying Shariah governance. Originality/value This paper provides empirical evidence of the SAP effects from the view of a more complex monitoring structure in consequence of having an additional layer of governance, devoting on the trade-off between benefit and cost to shareholders.

Corporate Governance and Culture in Banking

2019 ◽  
pp. 130-152 ◽  
Author(s):  
Jens Hagendorff
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Corporate Culture ◽  
Balance Sheet ◽  
Shareholder Wealth ◽  
Agency Conflicts ◽  
Executive Pay ◽  
Financial Firms ◽  
The Board Of Directors ◽  
Governance Arrangements

Banks differ from non-financial firms. These differences affect the manner of agency conflicts between the various bank stakeholder groups compared with non-financial firms. However, the main corporate governance arrangements used in the banking industry to mitigate these agency conflicts are largely similar to those of non-financial firms. A case in point is executive compensation. No other major industry has less equity on the balance sheet than banking. However, executive pay in banking is linked to shareholder wealth just as in other industries thus exacerbating existing incentives for bank managers to shift risk. Further, the governance arrangements in banking make the corporate culture prevailing in banks an important subject to study. This chapter reviews the literature on corporate governance in banking with a focus on those aspects of corporate governance in which banks (should) differ from non-financial firms, that is, executive compensation, the composition of the board of directors, and culture in banks. The chapter encourages a more profound rethink of the corporate governance of banks.

scholarly journals The view on corporate governance in transition economies: executive compensation in Croatia. Corporate governance in Macedonia and Romania

2013 ◽  
Vol 11 (4) ◽  
pp. 806-817
Author(s):  
Rezart Dibra
Keyword(s):  
Corporate Governance ◽  
Soviet Union ◽  
Executive Compensation ◽  
Transition Economies ◽  
Response Rate ◽  
Financial Institution ◽  
Berlin Wall ◽  
Executive Pay ◽  
The Soviet Union ◽  
The Republic

Corporate governance issues are especially important in transition economies, since these countries do not have the long-established financial institution infrastructure to deal with corporate governance issues. Before the fall of the Berlin Wall and the collapse of the Soviet Union, there was no need to discuss corporate governance issues because all enterprises were owned by the state and there were no shareholders. All that has changed since 1989. This paper discusses the view on corporate governance in some transition economies. Highly limited knowledge on executive pay in (post)transition economies creates demand for research in this filed; this paper explores executive compensation structure in Croatia. The research was conducted among Croatian public limited companies during December 2010 through February 2011 at a response rate of 18,44%. Paper also covers specificities of the development of the corporate governance structures and practices in the Republic of Macedonia.

scholarly journals Large changes in board size, corporate governance and firm value

2009 ◽  
Vol 7 (2) ◽  
pp. 440-450
Author(s):  
Yixi Ning ◽  
Massoud Metghalchi ◽  
Jonathan Du
Keyword(s):  
Corporate Governance ◽  
Empirical Evidence ◽  
Firm Size ◽  
Firm Value ◽  
Board Independence ◽  
Board Structure ◽  
Board Size ◽  
Good Opportunity ◽  
Long Run

We find that substantial changes in board size, either an increase or a decrease of three or more directors at one time, are permanent movements rather than temporary changes, but the large changes are followed by small reversal in the subsequent years. Empirical evidence shows that all types of directors (inside, affiliated, and independent) are strongly affected by board size expansions (or reductions). Large changes in board size provide a good opportunity for a firm to optimize its board structure by increasing board independence and retiring elder directors. Further analysis indicates that such substantial changes in board size are associated with more frequent board meetings, a higher likelihood of CEO transitions, and firm size expansions. However, we find no evidence that large decreases (or increases) in board size add (or destroy) firm value for shareholders in the long run.

scholarly journals Could the Pay Ratio Disclosure Backfire?

2017 ◽  
Vol 4 (3) ◽  
pp. 417-448 ◽  
Author(s):  
Jillian Loh
Keyword(s):  
Corporate Governance ◽  
Financial Crisis ◽  
Executive Compensation ◽  
Financial System ◽  
Regulatory System ◽  
The United States ◽  
System Reform ◽  
Executive Pay ◽  
Governance Practices ◽  
The 2008 Financial Crisis

At the signing of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), President Barack Obama asserted that, “We all win when investors around the world have confidence in our markets. We all win when shareholders have more power and more information. . . . And we all win when folks are rewarded based on how well they perform, not how well they evade accountability.” After the financial crisis in 2008, the Obama Administration recognized the need to reconstruct the existing American financial regulatory system to ensure that a financial meltdown would never happen again. It is quite clear that Congress’s purpose behind the Dodd-Frank Act is to redevelop the financial system to ensure that the 2008 financial crisis will never be repeated. However, the Dodd-Frank Act contains considerable provisions that add substantial new requirements for certain publicly traded companies based in the United States. Analysts have theorized that the creation of new regulations relating to executive compensation and corporate governance was due to assertions that large executive pay contributed to the financial crisis. There has been much debate over whether such changes to executive compensation and corporate governance practices under Title IX of the DoddFrank Act are meeting the intended goals of financial system reform.

Corporate governance and financial policies

2015 ◽  
Vol 41 (3) ◽  
pp. 267-285 ◽  
Author(s):  
Subba Reddy Yarram ◽  
Brian Dollery
Keyword(s):  
Corporate Governance ◽  
Life Cycle ◽  
Dividend Policy ◽  
Agency Cost ◽  
Positive Influence ◽  
Independent Directors ◽  
Board Independence ◽  
Dividend Payout ◽  
Content Type ◽  
Significant Positive Influence

Purpose – The purpose of this paper is to examine the influence of board structure on dividend policy of Australian corporate firms. It also considers the traditional explanations of corporate dividend choice, such as agency cost theory, signalling hypothesis, the life cycle hypothesis along with tax-based explanations of dividend policy. Design/methodology/approach – The final sample consists of 413 non-financial firms that are part of the All Ordinaries Index. The causal analysis was undertaken in three stages. In the first stage, the authors analyse the likelihood of paying dividends. And classify all firms as either dividend payers or non-payers. The authors then model this binary variable as a function of different sets of variables. In the second stage, the authors analyse the factors determining the magnitude of dividend payout by those firms that have paid a dividend. In contrast, stage three employs all firms – those which did not pay any dividend and those firms which paid a dividend. Findings – For the study period 2004-2009, this study finds that board independence has a significant positive influence on the dividend payout of Australian firms. This finding is consistent with the “outcome” model of La Porta et al. (2000). This study also finds that size has a significant positive influence on the dividend payout of Australian firms thus providing support for the agency cost view of dividend policy. Similarly, this study also finds support for the signalling hypothesis and the life cycle theory given the significant positive influence of profitability and the significant negative influence of current losses and growth opportunities on the dividend policy of Australian firms. Research limitations/implications – The findings of the study are robust with to alternative measures of variables employed and are not influenced by the global financial crisis. However, this study did not consider the possible endogenous and multiple relationships between dividends, debt, profitability, cash holdings and governance structures given the limited study period considered. Practical implications – This study finds that board independence has a significant positive influence on the dividend behaviour of Australian firms. This suggests that dividends and independent directors play complementary governance roles. While dividends provide the monitoring and disciplinary roles, independent directors act as catalysts for enhancing effective board functioning. These findings have implications for corporate governance policies and the payout policies. Originality/value – Though the governance role of dividends has long been recognized in the literature (Easterbrook, 1984; Jensen, 1986), very few studies analyse the influence of board characteristics on the decision to pay dividends in Australia. Given the distinct Australian setting where the tax imputation system allows companies to pay franked dividends to domestic investors, this study provides evidence on the interaction of corporate and dividend policies. This study finds that dividend polices are influenced by percentage franking of dividends. This study also finds that board independence has a significant positive influence on the dividend policy of Australian firms.

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