Compensation Consultants and CEO Pay: UK Evidence

Voulgaris, Georgios; Stathopoulos, Konstantinos; Walker, Martin

doi:10.1111/j.1467-8683.2010.00822.x

Cited by 34 publications

(22 citation statements)

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“…6 An equity ownership of 5% is widely considered to be the threshold for considering a shareholder as "large" (i.e., a blockholder) (e.g., Agrawal and Knoeber, 1996;Cremers and Nair, 2005;Cronqvist and Fahlenbrach, 2009 We construct an alternative ownership concentration measure (ownership concentration (2)) equal to the percentage of shares held by the company's largest shareholder. Rediker and Seth (1995) and Voulgaris et al (2010), among others, use an equivalent measure.…”

Section: Proxies For Corporate Governance Qualitymentioning

confidence: 99%

Does Corporate Governance Influence Convertible Bond Issuance?

2012

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We examine the influence of corporate governance quality on firms' choice between convertible debt, straight debt, and equity using a Western European sample of security offerings made between 2000 and 2010. We find that weaker firm-specific and countryspecific corporate governance quality increases firms' likelihood of issuing convertible debt instead of straight debt and common equity. We also find that stockholder reactions to convertible debt announcements are more favorable for firms with weaker corporate governance. Our results suggest that corporate governance quality is a significant security choice determinant, with firms using convertible debt as a substitute for high quality governance mechanisms.

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Section: Proxies For Corporate Governance Qualitymentioning

confidence: 99%

Does Corporate Governance Influence Convertible Bond Issuance?

2012

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“…In these analyses (Bebchuk & Fried, 2004, 2005; Jensen & Murphy, 2004), remuneration consultants, who have incentives to please executives (i.e., they are reliant on the executives for current and future business), provide benchmark information and remuneration package proposals for the board of directors, which then raise the total remuneration of the executives (Bebchuk & Fried, 2004). Studies focusing on the role of remuneration consultants indicate that their use increases executive remuneration (Murphy & Sandino, 2010; Voulgaris et al, 2010).…”

Section: Remuneration Process and Consultantsmentioning

confidence: 99%

“…Previously, researchers have not opened the black box of the social relations and processes of remuneration design (e.g., Voulgaris et al, 2010). Instead they have relied on public data that shed very limited light on the roles and processes of the board of directors (Adams, Hermalin, & Weisbach, 2010) including the remuneration design process.…”

Section: Remuneration Process and Consultantsmentioning

confidence: 99%

“…The majority of recent corporate governance and executive remuneration research has reported that executive pay is generally higher in organizations that are the clients of remuneration consulting firms (Armstrong, Ittner, & Larcker, 2008; Cadman, Carter, & Hillegeist, 2010; Conyon, Peck, & Sadler, 2009; Goh & Gupta, 2010; Kabir & Minhat, 2011; Murphy & Sandino, 2010; Voulgaris, Stathopoulos, & Walker, 2010). Although these studies have indicated that remuneration consultants provide a mechanism for company executives to increase their pay and to justify this increase, none of these have identified the nature of this mechanism.…”

Section: Introductionmentioning

confidence: 99%

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“Independent” Consultants' Role in the Executive Remuneration Design Process under Restrictive Guidelines

Kostiander

Ikäheimo

2011

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: This study explores the remuneration consultant-client relationship in a non-Anglo-American context, focusing on what consultants do under heavy political remuneration guidance. Research Findings/Insights: A qualitative social constructivist approach was adopted, drawing on interviews with the CEO and "independent" chairman of the board of 23 Finnish state-owned enterprises, as well as four leading consultants. The research context considerably differs from that of the US, since the State takes an active role in providing remuneration guidelines. Finland also represents a country with a high level of corporate governance and low level of corruption. Nonetheless, our results strongly support the managerial entrenchment perspective fraught with problems and filled with game playing, where "specialized" consultants and CEOs play the major roles, resulting in increased salary levels, slack, an emphasis on share-based incentives, and public outrage. The effectiveness of these guidelines would be hard, even impossible, to understand, without proper analysis of human interaction related to it. Theoretical/Academic Implications: The study questions the definition of consultant independence based on external data. Second, routine practices commonly bypass rules, leading to the unintended consequence of forced change. Third, the structure of consultancy markets and long consultant-client relationships play an important role in the services offered by consultants. Practioner/Policy Implications: The findings show that restrictive remuneration guidelines can be ineffective and lead to standardized pay designs without providing competitive advantage. Shareholders should request greater transparency concerning remuneration design. The role of consultants should be considered proactively in the guidelines, even by limiting the length of the consultant-client relationship or increasing their transparency.

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“…The wide use of remuneration consultants in advising on executive remuneration determination process in the UK has been evidenced by past studies (Goh and Gupta, 2011;Conyon et al, 2009;Kabir and Minhat, 2010;Voulgaris et al, 2010). Many studies on the determination of executive remuneration have analysed factors such as company size, performance, industry, human capital and board structure.…”

Section: Introductionmentioning

confidence: 99%

Remuneration consultants’ advice and its effect on pay

Ndzi

2015

International Journal of Law and Management

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Access to this document was granted through an Emerald subscription provided by emeraldsrm:305060 [] For AuthorsIf 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. AbstractPurpose -The purpose of this paper is to investigate the nature of advice that the remuneration consultants offer to the companies on executive pay. It explores how the advice offered affects the level of executive remuneration. Furthermore, it investigates whether the nature of advice offered forms part of the reasons why remuneration consultants have been criticised to be correlated with high executive pay. Design/methodology/approach -This paper analysis the data obtained from interviewing remuneration consultants from prominent consultancy firms that operate in the UK and the USA. Findings -This paper demonstrates that remuneration consultants' advice on executive remuneration is not always objective. The nature of advice depends on whether the consultants have a balance of portfolio of companies (self-interest) or whether they have the courage to stand up to confrontations from the executives (fear of executives). This study shows that the purpose of using remuneration consultants in advising on executive remuneration is defeated. Also, the practice pushes up pay levels.Research limitations/implications -The research focused on large consultancy firm operating in the UK and/or the USA. Access to the participants was very difficult due to their busy schedules. Practical implications -This paper demonstrates the effect that lack of best practice on benchmarking is partly responsible for the high executive pay levels. Social implications -This paper will inform companies on the nature of advice that remuneration consultant's offer and its effect on pay levels. Secondly, it will provide the shareholders with vital information they require to vote on remuneration policy in the annual general meeting. Originality/value -This paper demonstrates the effect that lack of best practice on benchmarking is partly responsible for the high executive pay levels. This paper will inform companies on the nature of advice that remuneration consultant's offer and its effect on pay levels. Secondly, it will provide the shareholders with vital information they require to vote on remune...

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Compensation Consultants and CEO Pay: UK Evidence

Cited by 34 publications

References 60 publications

Does Corporate Governance Influence Convertible Bond Issuance?

Does Corporate Governance Influence Convertible Bond Issuance?

“Independent” Consultants' Role in the Executive Remuneration Design Process under Restrictive Guidelines

Remuneration consultants’ advice and its effect on pay

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