CFO compensation: Evidence from Australia

This article analyses whether the transition from the 2004 CLERP 9 advisory Say-on-Pay regime to the 'Two Strikes' rule in 2012 influenced CEO pay in Australian firms. Analysing a panel of 2,074 firm-years (2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015), we find that (i) CEO pay is a positive predictor of shareholder dissent; (ii) firm performance has a reducing effect on shareholder dissent; (iii) excessive shareholder dissent moderated CEO pay under the 'Two Strikes' rule relative to the CLERP 9 regime, and (iv) the market responded favourably to the introduction of the 'Two Strikes' rule and negatively to 'strike' instances after its introduction.

Section: Empirical Analysismentioning

confidence: 99%

“… Termination payments, despite being made at the conclusion of employment should theoretically be amortised over the entire employment horizon of the CEO. Thus, by excluding final year payments, this decreases the likelihood of misrepresenting remuneration figures for individual executives (Merhebi et al ., ; Bushman et al ., ; Duong and Evans, ). …”

mentioning

confidence: 99%

Changing board behaviour: The role of the ‘Two Strikes’ rule in improving the efficacy of Australian Say‐on‐Pay

Borthwick

Jun

2018

“…() found that firms with well‐structured remuneration committees, more independent directors on the board and separation of the roles of CEO and board chair are more likely to grant options with longer time‐vesting features and performance hurdles. Duong and Evans () investigate the extent to which the incentive alignment theory and the managerial power theory explain the variability of CFO compensation in Australia. Xu et al .…”

Section: Previous Literature and Hypothesis Developmentmentioning

confidence: 99%

Evidence of governance arbitrage by private equity sponsors

Schofield

2018

The motivation for private equity bids is not well understood, partly due to the private nature of their activity. This research contributes to understanding the merits of current-day private equity by examining whether ineffective governance of target public corporations contributes to the role that private equity fulfils. I examine the characteristics of large public target firms that receive a private equity bid to investigate the evidence that private equity is motivated to address ineffective governance. I find evidence the private equity is motivated by what is referred to as governance arbitrage and that this role is heightened when there are constraints such as the imposition of uniform governance practices within public corporations.

“…Core et al, 1999;Bebchuk and Fried, 2004;Meherbi et al, 2006;Faleye et al, 2011;Bugeja et al, 2016;Duong and Evans, 2015), we control for CEO power, other board and firm characteristics that are known to affect CEO compensation. CEO power is proxied by four CEOrelated variables: CEO duality (DUAL), ownership (CEO_OWN), age (AGE) and tenure (TENURE).…”

Section: Measures Of Other Explanatory Variablesmentioning

confidence: 99%

How do ‘busy’ and ‘overlap’ directors relate to CEO pay structure and incentives?

Pathan

Wong

Benson

2017

We examine how CEO compensation is affected by the presence of busy and overlap directors. We find that CEOs at firms with more busy directors receive greater total pay, fixed salary and equity-linked pay and exhibit higher payperformance (delta) and pay-risk (vega) sensitivities. Our results also suggest that CEOs at firms with more overlap directors take smaller total pay and equity-linked pay and reveal lower delta and vega. We further show that the impact of busy and overlap directors on CEO pay is more visible for firms with less complexity and low information acquisition cost.