Abstract:We exploit the large rise in relative performance awards in the UK over the last two decades to investigate whether these contracts improve the alignment between CEO pay and performance. We first document that corporate governance appears to be stronger when institutional ownership is greater. Then, using hand-collected data from annual reports on explicit contracts, we show that (1) CEO pay still responds more to increases in the firms’ stock performance than to decreases and, importantly, this asymmetry is s… Show more
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