Determinants of CEO Compensation before and after the Financial Crisis

Sonenshine, Ralph; Larson, Nathan; Cauvel, Michael

doi:10.4236/me.2016.712133

Cited by 11 publications

(31 citation statements)

References 34 publications

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“…The aforementioned relation also appears in Himmelberg and Hubbard (2000), Terviö (2008), Gabaix and Landier (2008), Chen (2017), Jung and Subramanian (2017) and, from a more critical point of view, in Elson and Ferrere (2013). Sonenshine et al (2016) offer a review on this issue.…”

Section: Related Literaturementioning

confidence: 94%

“…The relation between executive compensation and firm performance has also been subject to debate, being possible to identify two points of view: "pay for performance" and "pay without performance." For instance, Sonenshine et al (2016Sonenshine et al ( , p. 1475) state that the financial crisis appears to have altered the determinants of CEO compensation toward pay for performance versus other factors (such as firm size). Rosen (1992), Hall and Liebman (1998), Core et al (2003), Bertrand (2009), Frydman and Jenter (2010) and Essen et al (2012) seem also close to the "pay for performance" standpoint, whereas Fried (2004, 2005), Djankov et al (2008), or Bell and Van Reenen (2016) place the emphasis on the "pay without performance" perspective; for example, for Bebchuk and Fried (2005), managerial power has played a key role in shaping executive pay.…”

Section: Related Literaturementioning

confidence: 99%

“…As we could expect, linked to the empirical side of hedonic theory, there are an abundant number of references that include regressions of director compensation on firm and individual characteristics, such as Core et al (1999), Johnston (2002), Cordeiro and Veliyath (2003), Frydman and Saks (2010), Graham et al (2012), Sonenshine et al (2016), Matveyev (2017) and Edmans et al (2017), among others. Frequently, they are panel, mixed or pooled regressions with data of different time periods, often including fixed or random effects; as we will see later, we focus on mixed models in this study.…”

Section: Introductionmentioning

confidence: 99%

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On directors’ compensation: a multilevel analysis of Spanish listed companies

et al. 2022

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This study analyzes the determinants of the annual compensation of directors belonging to the boards of the Spanish companies that constitute the IBEX 35 stock index. We investigate the importance of observed and unobserved heterogeneity in explaining director compensation. Based on a three-level mixed effect model, our analysis includes time-invariant random effects at company and manager level as determinants of director pay. We find that company effects explain 30% of the variation in director pay, while company and director effects taken together explain 77% of that variation. Our findings suggest that the characteristics of the company, in terms of activity sector, size and financial performance, and the professional attributes of the director (especially the role within the board), influence the compensation received. In addition, some directors and companies show random effects (either positive or negative) that significantly separate them from the expected compensation estimated from the fixed part of the model.

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Section: Related Literaturementioning

confidence: 94%

Section: Related Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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On directors’ compensation: a multilevel analysis of Spanish listed companies

et al. 2022

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“…The recent literature on board independence also highlights the role of independent directors in increasing the corporate innovation (Balsmeier, Fleming, & Manso, 2017; Lu & Wang, 2018). There are many studies which highlight the role of independent directors on crucial board decisions such as anti-takeover defences (Byrd & Hickman, 1992), restructuring (Johnson, Hoskisson, & Hitt, 1993), corporate social responsibility (Zhang, Zhu, & Ding, 2013) executive compensation (Sonenshine, Larson, & Cauvel, 2015; Vafeas, 2000) and impacts stock volatility (Christy, Matolcsy, Wright, & Wyatt, 2013), IPO’s valuation (Bertoni, Meoli, & Vismara, 2014) and cost of debt (Bradley & Chen, 2015), but no study has examined their signalling role on institutional investor’s ownership.…”

Section: Introductionmentioning

confidence: 99%

Does Board Composition Matter to Institutional Investors?

Bansal

Thenmozhi

2019

Journal of Emerging Market Finance

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This study examines the resource dependency and signalling role of independent directors from the perspective of institutional investor’s and also investigates if the presence of large blockholder moderates the signalling effect. This study uses the quasi-natural experiment to examine this relationship. The difference-in-difference (DiD) analysis of 5,298 firm observations covering 618 National Stock Exchange (NSE) listed Indian firms for the period 2001–2011 provides empirical evidence that board composition does matter to institutional investors. We find that non-compliant firms who adopted the board independence requirement experience a significant increase in institutional ownership relative to previously compliant firms. We also find that institutional investors have invested more in family-owned firms during post-mandate period compared to government-, private- and foreign-owned firms. Overall, this study contributes to the existing literature on resource dependency theory and signalling theory and shows that the board independence acts as a signal to institutional investors and decreases the agency cost and cost of monitoring. JEL Codes: G3, G11, G34, G38, G23

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Because the 2008/2009 economic crisis forced companies to reassess how their business operations were conducted, it is envisaged that, as part of this reassessment, the attitudes about determining executive remuneration changed as well to be more in line with company performance (Sonenshine, Larson, & Cauvel, 2016). Furthermore, Yang, Dolar andMo (2014) found that the link between business performance and chief executive officers' (CEOs) remuneration depicts different types of patterns in the pre-and post-crisis periods.

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mentioning

confidence: 99%

The effect of the economic crisis on pay-performance link in South African state-owned enterprises

Bezuidenhout

2021

South African Journal of Business Management

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Purpose: The dissatisfaction with executive remuneration worldwide has increased because it is generally believed to have been instrumental to the 2008 Global Economic crisis. Central to this is the apparent unsatisfactory relationship between business performance and chief executive officer (CEO) remuneration. The primary aim of this study was to compare the pay-for-performance association between CEOs’ remuneration and state-owned entity performance before, during and after the economic crisis. It did so by assessing the chief executive remuneration link with state-owned enterprise performance from the period 2006 to 2014.Design/methodology/approach: Twenty-one schedule 2 state-owned enterprises in South Africa. This quantitative, longitudinal study, obtained secondary data from the annual reports of state-owned enterprises from the period 2006 to 2014. Ordinary least square multiple regression analysis was used as the principal statistical method.Findings/results: The findings indicate that the link between chief executive remuneration and state-owned entity performance demonstrated different patterns in the pre- and post-crisis periods.Practical implications: State-owned entity remuneration committees should place more emphasis on the financial efficiency measurements to enhance efficiencies in South African state-owned enterprises. Shareholders and regulators should take cognisance of measures to be used to assess the potential performance of state-owned entities, through executive remuneration, especially during an economic crisis. Findings could furthermore be of importance to other academics investigating this phenomenon.Originality/value: This research provides additional knowledge to the limited research available on SOEs in South Africa. Further, it reveals that an economic downturn affects the link between CEOs’ remuneration and SOE performance. This addresses a knowledge gap concerning the pay-for-performance link in South African SOEs and in emerging economies in general.

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Determinants of CEO Compensation before and after the Financial Crisis

Cited by 11 publications

References 34 publications

On directors’ compensation: a multilevel analysis of Spanish listed companies

On directors’ compensation: a multilevel analysis of Spanish listed companies

Does Board Composition Matter to Institutional Investors?

The effect of the economic crisis on pay-performance link in South African state-owned enterprises

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