An Overview of the Executive Remuneration Issue Across the Crisis PDF Download

Author: Guido Ferrarini
Publisher:
ISBN:
Category :
Languages : en
Pages : 18

View

Book Description
The paper outlines the developments in the EU regulatory framework for executive remuneration since 2004 and going through the financial crisis. It also presents the results of an analysis of the remuneration practices adopted by the largest European listed firms before and after the crisis, drawing policy conclusions on the efficacy and prospects of reforms, in consideration of their implementation so far.

Author: Tito Boeri
Publisher: OUP Oxford
ISBN: 0191648582
Category : Business & Economics
Languages : en
Pages : 311

View

Book Description
The recent financial crisis has created a public outcry over top-executive pay packages and has led to calls for reform of executive pay in Europe and the US. The current controversy is not the first - nor will it be the last - time that executive compensation has sparked outrage and led to regulation on both sides of the Atlantic. This volume compares US and European CEOs to trace the evolution of executive compensation, its controversies and its resulting regulations. It shows that many features of current executive compensation practices reflect the, often-unintended, consequences of regulatory responses to perceived abuses in top-executive pay, which frequently stem from relatively isolated events or situations. Regulation creates unintended (and usually costly) side effects and it is often driven by political agendas rather than shareholder value. Improvements in executive compensation are more likely to come from stronger corporate governance, and not through direct government intervention. The volume also examines the effects of incentive schemes and the patterns of performance related pay both within and across countries. It documents a number of empirical regularities and discusses whether government should intervene to support the implementation of incentive pay schemes. It argues that it makes little sense to undertake reform without detailed simulations of the effect on the economy under alternative economic scenarios, based on sound analysis and extensive discussion with labour, management, and government decision-makers.

Author: Guido Ferrarini
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

View

Book Description
This article considers the regulation “on the books” of executive pay across the EU and the evidence “in action” on corporate practice concerning executive pay (based on disclosures by FTSE Eurofirst 300 companies) in relation to the best practice recommendations set out in two key Commission Recommendations from 2004 and 2005. It finds that Member State implementation of the two Recommendations has been patchy and, in particular, that reliance on Corporate Governance Codes has not resulted in the embedding of good practices, particularly with respect to disclosure concerning executive pay, across Europe's largest companies. It argues that if the EU is to succeed in promoting stronger alignment between shareholder and manager interests by means of the executive pay contract, closer attention is needed to remuneration governance and that a mandatory, harmonised disclosure obligation should be introduced. Although the Commission has recently adopted a 2009 Recommendation on executive pay in the corporate sector generally as part of its response to the financial crisis, the article suggests that this attempt to influence the design of executive pay is misconceived and that attention would have been better focused on the enforcement of basic disclosure obligations.

Author: Alexander Kostyuk
Publisher: Emerald Group Publishing
ISBN: 1785606824
Category : Business & Economics
Languages : en
Pages : 299

View

Book Description
This book argues for a correct balance between risk and reward and for Directors' remuneration to be equitable to all parties and stakeholders. By examining the current theories, practices and regulations and explaining them in detail it provides a state of the art overview of one of the key corporate governance issues of our time.

Author: Guido Ferrarini
Publisher:
ISBN:
Category :
Languages : en
Pages : 55

View

Book Description
In this chapter, we analyse current trends in the regulation and practice of executive remuneration. No doubt, the role of regulation in this area is on the rise, particularly after the recent financial crisis, and the standards as to pay governance and structures are spreading from the financial sector to the non-financial one. As a consequence, today's remuneration practices are shaped not only by the need to reduce managerial agency costs at listed companies through appropriate incentives, but also by the hard and soft laws tackling corporate governance and remuneration structures. Moreover, regulation also responds to social issues and political pressures, reflecting concerns about either inequality in the distribution of wealth or incentives to undertake “excessive” risks in the financial sector. We examine, in particular, the main policy questions concerning incentive pay, including the optimal design of stock options and the importance of longterm pay. Amongst the governance mechanisms, we consider both the role of boards and independent directors, and that of shareholders under say on pay rules, taking into account the rise of shareholder engagement in listed companies across the Atlantic. We also analyse regulatory developments in Europe over the last decade and current postcrisis proposals by the Commission, comparing the same with developments at member state level and in the US. In particular, we highlight the impact of say on pay rules on shareholder activism, expanding on the role of proxy advisors and the behaviour of large institutional investors. We lastly focus on the regulation of pay structures, showing that long-term incentives are clearly favoured for both financial and non-financial companies by either regulators or institutional investors. However, financial institutions are the main target of post-crisis reforms, firstly at international level and secondly in the US and the EU, where the FSB principles have been implemented along partially diverging routes. CRD IV, in particular, has marked a new trend in the regulation of bankers' pay, by imposing a bonus cap that we criticize from an economic perspective and which clearly goes beyond the international principles.

Author: Lucian A. Bebchuk
Publisher: Harvard University Press
ISBN: 9780674020634
Category : Business & Economics
Languages : en
Pages : 308

View

Book Description
The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.

Author: Christos Boras
Publisher: GRIN Verlag
ISBN: 3668918686
Category : Business & Economics
Languages : en
Pages : 74

View

Book Description
Doctoral Thesis / Dissertation from the year 2014 in the subject Business economics - Business Management, Corporate Governance, grade: 72%, Aston University (Business School), course: MSc in Accounting and Finance, language: English, abstract: This report provides an analysis and evaluation over the executive remuneration issues. The basic issues in this report raised the public debate and the academic literature findings over the misalignment between the pay and performance and the level of executives’ emoluments. In order to provide a more specific and practical perspective of the issues raised, this project used a case study of Tate & Lyle plc. and its main competitor Associated British Foods plc. Methods of analysis include the review over the UK corporate governance evolution on executive remuneration matters. The second part of the review is based on the academic literature review. Furthermore, the internal structure of both companies and the level of salaries in the hierarchy give an explanation over the level of the executive emoluments. Moreover, the structure of the executive remuneration is approved in both companies by the majority of the shareholders and there is evidence that the short-term and long-term performance of the companies have an important effect on executives’ salary. Last but not least, there is evidence that the executive remuneration is almost the same across the same industry even if the performance between two companies is different. The report finds that both companies are in line with UK corporate governance code guidelines and aligned pay with performance. However, there are not adequate case studies through different industries in order to have a more precise information over the relationship between pay and performance of other companies. The major area of weakness on the academic literature is the lack of case studies which can provide more detailed information of practical implementations of the Code and academic literature. Moreover, the institutions and most of the academic research is based on using average figures based on the FTSE100, FTSE250 and FTSE350 Indexes. The report also investigates the fact that the analysis conducted has limitations. Some of the limitations include the lack of ABF’s annual report for 2014. In order to overpass this difficulty, this project used the annual report of 2013 for both companies. Another limitation was the lack of case studies over the executive remuneration issues based on certain companies rather than the average trend of an Index. Last but not least, there was no other case study of a company over the executive remuneration issues in order to use the methodology.

Author: Robert W. Kolb
Publisher: Oxford University Press
ISBN: 0199829594
Category : Business & Economics
Languages : en
Pages : 231

View

Book Description
The scholarly literature on executive compensation is vast. As such, this literature provides an unparalleled resource for studying the interaction between the setting of incentives (or the attempted setting of incentives) and the behavior that is actually adduced. From this literature, there are several reasons for believing that one can set incentives in executive compensation with a high rate of success in guiding CEO behavior, and one might expect CEO compensation to be a textbook example of the successful use of incentives. Also, as executive compensation has been studied intensively in the academic literature, we might also expect the success of incentive compensation to be well-documented. Historically, however, this has been very far from the case. In Too Much Is Not Enough, Robert W. Kolb studies the performance of incentives in executive compensation across many dimensions of CEO performance. The book begins with an overview of incentives and unintended consequences. Then it focuses on the theory of incentives as applied to compensation generally, and as applied to executive compensation particularly. Subsequent chapters explore different facets of executive compensation and assess the evidence on how well incentive compensation performs in each arena. The book concludes with a final chapter that provides an overall assessment of the value of incentives in guiding executive behavior. In it, Kolb argues that incentive compensation for executives is so problematic and so prone to error that the social value of giving huge incentive compensation packages is likely to be negative on balance. In focusing on incentives, the book provides a much sought-after resource, for while there are a number of books on executive compensation, none focuses specifically on incentives. Given the recent fervor over executive compensation, this unique but logical perspective will garner much interest. And while the literature being considered and evaluated is technical, the book is written in a non-mathematical way accessible to any college-educated reader.

Author: Ira Kay
Publisher: Cambridge University Press
ISBN: 9780521871952
Category : Business & Economics
Languages : en
Pages : 278

View

Book Description
This book answers the question 'Are CEOs overpaid?' with a resounding 'No.' Defying dogma and business myths, it documents the realities of executive pay in the United States and the forces that have shaped pay in recent years. The authors, both expert consultants on the subject, investigate the extent to which pay is related to corporate performance and provide clear guidance for an approach that drives business success and shareholder value. Based on extensive research and decades of direct experience in working with thousands of companies, the book provides provocative insights for executives, analysts, government officials, and shareholders.

Author: Abdulrahman Saleem
Publisher:
ISBN:
Category :
Languages : en
Pages : 41

View

Book Description
Executive compensation have been a controversial issue since early 90's, and it became the subject of many studies, newspaper articles and books especially after the Enron scandal in the year of 2000. Corporate governance reforms were demanded by many academics and experts around the world including the issue of setting remuneration packages, as to who is the best to decide, and what are the procedures to follow. This paper aimed to present legislative development in the UK that controls this aspect of corporate governance. Also, development through case law in the State of Delaware will also be discussed. In addition, post crisis changes will also be presented in both jurisdictions; also the relationship between executive pay and the crisis will be demonstrated. Finally, this research will present several proposed solutions to the compensation dilemma. It must be said that this research only concerns with executives and managing directors who may have influence over the board as a whole in setting their pay and not with none executive directors. In the UK, there have been number of committees that produced recommendations to tackle this issue chief among them the Cadbury committee which mainly demanded more transparency and disclosures. In the State of Delaware, Corporate law had made it clear that setting remuneration is in the hand of the board, and Delaware's courts have adopted high standard of review in derivative action. There have been slight changes in both jurisdictions but, as seen by many, they are still not enough to solve the problem. Solutions such as making compensation committees more independent and giving more powers to shareholders in making compensation decisions are among most proposed solutions. The research concludes to an important relationship between compensation practices and the crisis. Current practices allows CEO's to be given high bonuses from short term profits, and this motivated them to take huge risks in order to raise their pay. These risky decisions have led to the failure of many “too big to fail” firms which caused the financial meltdown.