This study investigates independent non-executive directors' remuneration from an agency theory perspective, taking into account both optimal contracting and managerial power perspectives. Using a sample of 1733 independent non-executive directors' year observations in Italian and UK non-financial firms listed in the period 2007-2009, we find that in both countries independent non-executive directors' remuneration is mainly based on the observable effort they exert and their responsibilities. Our findings also show that independent non-executive directors who do not fulfil formal independence criteria, as stated in the respective national corporate governance codes, seem to be paid more than those who do fulfil such criteria, particularly in the UK.Our findings contribute to the existing literature by providing evidence on the determinants of independent non-executive directors' remuneration in two major European economies and offer insights to policy-makers by questioning the effectiveness of adopting non-binding criteria when assessing non-executive directors' independence.
Purpose-This study explores the use of narratives in biodiversity reports as a mechanism to raise the awareness of biodiversity's importance. By classifying biodiversity narratives into 14 categories of biodiversity values this paper investigates whether the explanations for biodiversity conservation used by UK local councils are line with shallow, intermediate or deep philosophies. Design/methodology/approach-This study used content analysis to examine the disclosures on biodiversity's importance in the biodiversity action plans published by UK local councils. The narratives were first identified and then allocated into 14 categories of biodiversity value. Then, they were ascribed to either shallow (resource conservation, human welfare ecology and preservationism), intermediate (environmental stewardship and moral extensionism) or deep philosophies. Findings-UK local councils explained biodiversity's importance mainly in terms of its instrumental value, in line with shallow philosophies such as human welfare ecology and resource conservation. UK local councils sought to raise awareness of biodiversity' importance by highlighting values that are important for the stakeholders that are able to contribute towards biodiversity conservation such as landowners, residents, visitors, business and industries. We also found that local councils' biodiversity strategies were strongly influenced by 2010, the International Year of Biodiversity. Originality/value-This paper is one of the few accounting studies that engages with the literature on environmental ethics to investigate biodiversity. In line with stakeholder theory, it indicates that explanations on biodiversity's importance based on anthropocentric philosophies are considered more effective in informing those stakeholders whose behaviour needs to be changed to improve biodiversity conservation.
Purpose The purpose of this paper is to analyse the current nature and content of biodiversity reporting practices adopted by English local councils. By adopting a multi-theoretical framework that relies on economic and social theories such as agency, stakeholder, legitimacy and institutional theories, this study also aims to investigate the factors that explain the extent of biodiversity disclosure provided by local councils. Design/methodology/approach This study uses a self-constructed disclosure index to analyse the biodiversity-related information published in the official websites of 351 English local councils. A multivariate analysis was conducted to analyse the association between local councils’ characteristics and biodiversity disclosure. Findings This study shows that the information disclosed on local biodiversity is limited and does not allow the interested stakeholders to get a comprehensive picture of the current status of local biodiversity. It also provides evidence that the level of biodiversity disclosure is significantly associated with the level of local council’s population, the presence of councillors from environmentally oriented parties and environmental non-governmental organisations operating in the local council area, poor biodiversity management practices and local councils’ visibility. Originality/value This study is one of the few accounting studies that provides a comprehensive analysis of biodiversity disclosure by analysing its nature and content and investigating the factors associated with such disclosure. It extends agency, stakeholder, institutional and legitimacy theories, by showing that local councils use voluntary disclosures to satisfy the informational needs of the main stakeholders and to assure that their strategies and practices conform to the values and expectations of the community they represent.
This study relies on environmental stewardship, a stakeholder enlarged view of stewardship theory, and institutional theory to analyze the relationship between CEO compensation and firms' environmental commitment in a worldwide sample of 520 large listed firms. Our findings show that environment friendly firms pay their CEOs less total compensation and rely less on incentive-based compensation than environment careless firms. This negative relationship is stronger in institutional contexts where national environmental regulations are weaker. Our findings have important theoretical meaning and practical implications. Results show that CEOs do not necessarily act opportunistically; rather some of them may be willing to act as stewards of the natural environment and accept a lower, less incentive-based, compensation from environment friendly firms. This study also provides evidence of the important influence of the institutional context in setting-up CEO compensation as the relationship is stronger when national environmental regulations are weaker.Our findings question the universal validity of agency theory in explaining CEO compensation.Compensation based on pecuniary incentives might be less indicated to motivate CEOs who feel rewarded by playing a stewardship role for environment friendly firms. When designing compensation for CEOs, compensation committees and external compensation advisors should consider psychological and institutional factors that might affect CEO motivation.
The aim of this study is to explore how stock options are used for executive remuneration in blockholder-dominated listed firms. By analysing how stock options granted to executive directors were designed, this paper sheds light on how stock options are used in Italian blockholder-dominated listed firms. Empirical evidence from a unique hand-collected dataset comprising stock options granted by Italian non-financial listed firms between 2004 and 2006 suggests that stock option design seems to be better explained by rent-extraction theory than by optimal contracting theory. Our results suggest that board independence, particularly in terms of minority shareholders’ representation, seems to have a positive influence on stock option design. These findings are consistent with rent-extraction theory:\ud stock option designs that are not explained by optimal-contracting theory are likely to reflect governance/agency problems. This study provides insights on executive remuneration to policy-makers. It is recommended that codes of best practice should stress the importance of stock option design and of remuneration committees’ independence, in particular in terms of minority shareholders’ representation.\ud Last but not least, this study points out the importance of enforcing substantial compliance with the codes’ recommendations
Abstract:Directors' remuneration is a key issue for both academics and policymakers. It has caused enormous controversy in recent years. This study uses a comprehensive index to analyse the disclosure of directors' remuneration in Italian and UK listed firms. It finds that the level of voluntary disclosure is significantly associated with firm-specific incentives, such as the demand for information from investors and the need for legitimacy. It finds that the level of voluntary disclosure is significantly higher in the UK than in Italy and that firm-specific incentives to disclose voluntary information differ according to the institutional setting in which a firm operates. In the UK, firm-specific incentives mostly come from the demand for information, estimated with the level of ownership diffusion, and the need for legitimacy generated by poor market performance and shareholders' dissent. In Italy, firm-specific incentives seem to be represented by the need for legitimacy generated by media coverage. This study also provides evidence that, in both countries, the information disclosed in corporate documents does not allow readers to obtain a comprehensive picture of directors' remuneration. Bonuses are poorly disclosed even though they are a key element of directors' remuneration. This finding is clearly important for policymakers at European and national level.Keywords: agency theory, directors' remuneration, disclosure, legitimacy theory. 2 IntroductionDirectors' remuneration aims to align the interests of directors with those of shareholders, thereby reducing agency problems (Jensen & Meckling, 1l976). However, directors' remuneration, of itself, could give rise to agency problems (Bebchuk et al., 2002). This is one of the key areas where directors may have a conflict of interest and where due account should be taken of the interests of shareholders (EU Commission, 2004). Controversy surrounding directors' remuneration reflects the perception that payments have been excessive and that the lack of timely and adequate disclosure has resulted in increased information asymmetry and rent-extraction (Bebchuk et al., 2002, Jensen et al., 2004. The demand for public disclosure arises from information asymmetry and agency conflicts between directors and outside investors (Healy & Palepu, 2001). Disclosure on directors' remuneration would help to resolve such problems. It can reduce information asymmetry on complex remuneration arrangements that can be an important mechanism to transfer wealth from shareholders to directors (Bebchuk et al., 2002;Laksmana, 2008; Nelson et al., 2010). Moreover, directors' remuneration has been blamed for playing a central role in many international corporate scandals, as well as having been a key factor that contributed to the global financial crisis (e.g., Bebchuk & Fried, 2005). Consequently, regulators have been concerned that directors should be accountable to shareholders by disclosing their remuneration policies. In particular, the EU Commission (2004;) has issued two non-binding ...
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.*Related content and download information correct at time of download. Does Graphical Reporting Improve Risk Disclosure? Evidence from European BanksPurpose: This study examines the voluntary disclosure of risk-related issues, with a focus on credit risk, in graphical reporting for listed banks in the major European economies. It aims to understand if banks portray credit risk-related information in graphs accurately and whether these graphs provide incremental, rather than replicative, information. It also investigates whether credit risk-related graphs provide a fair representation of risk performance or a more favourable impression than is warranted.Design/Methodology/Approach: A graphical accuracy index was constructed. Incremental information was measured. A multi-level linear model investigated whether credit risk affects the quantity and quality of graphical credit risk disclosure.Findings: Banks used credit risk graphs to provide incremental information. They were also selective, with riskier banks less likely to use risk graphs. Banks were accurate in their graphical reporting, particularly those with high levels of credit risk. These findings can be explained within an impression management perspective taking into account human cognitive biases. Preparers of risk graphs seem to prefer selective omission over obfuscation via inaccuracy. This probably reflects the fact that individuals, and by implication annual report's users, generally judge the provision of inaccurate information more harshly than the omission of unfavourable information. Research limitations/implications:This study provides theoretical insights by pointing out the limitations of a purely economics-based agency theory approach to impression management. Practical implications:The study suggests annual reports' readers need to be careful about subtle forms of impression management, such as those exploiting their cognitive bias. Regulatory and professional bodies should develop guidelines to ensure neutral and comparable graphical disclosure.Originality/Value: This study provides a substantive alternative to the predominant economic perspective on impression management in corporate reporting, by incorporating ...
Impression management and retrospective sense-making in corporate annual reports:banks' graphical reporting during the global financial crisis Abstract:This study investigates two potentially complementary reporting scenarios in annual reports: reactive impression management and retrospective sense-making. It examines stock market performance graphs in European listed banks' annual reports before and during the global financial crisis. Our results indicate that banks reacted to the global financial crisis by omitting stock market performance graphs from the annual report and from its most prominent sections. On the other hand, banks reduced favourable distortions and favourable performance comparisons. No significant evidence of retrospective sense-making is found. Overall, the findings are consistent with impression management incorporating human cognitive biases, with companies preferring misrepresentation by omission over misrepresentation by commission. Under high public scrutiny, banks appear to seek to provide a more favourable view by concealing negative information, rather than by favourable distortions or comparisons. The study contributes to the development of impression management theories. It uses a psychological interpretation that incorporates human cognitive biases, rather than adopting a purely economically-based perspective.
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