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The Financial Accounting Standards Board (FASB)/ International Accounting Standards Board (IASB) proposed Conceptual Framework solidifies stewardship as a primary financial reporting objective. Concurrently, fair value (FV) continues to be emphasized in FASB and IASB standards. In this study, using data from real estate firms in the UK, I test whether FVs provide stewardship-relevant information incremental to information provided by historical costs. Measuring stewardship by changes in CEO cash compensation and FVs through revaluations of investment properties, I find FVs provide stewardship information beyond historical costs; however, FVs must be supported by external appraisals to be useful. Further, FVs help to explain the traditional association between stock returns and compensation. The actual realization of FV changes through sale continues to be rewarded through compensation, meaning the full compensation value of FV changes is not given until realized. FV changes provide more useful stewardship information when FV estimates are of higher quality or when the CEO is more strongly governed. I also find that higher sensitivity to management effort, proxied by firm growth opportunities, makes FV changes more stewardship-relevant. Overall, I conclude that for UK real estate firms, FVs are useful for assessing management's stewardship with improvements in estimate quality and sensitivity to management effort increasing stewardship-usefulness; however, historical costs continue to be relevant for stewardship. My thesis provides insight into what information best captures management stewardship.

This thesis examines the causes of financial malfeasance in the largest U.S. telecommunications corporations between 1995 and 2004. Specifically, it examines whether or not the executive compensation package influences the likelihood that a corporation will falsify its financial statements. The methods used are both qualitative and quantitative. I approach the question form a historical point of view and attempt to identify certain salient characteristics within the telecommunications industry that may influence of unethical or illegal activity. The findings support organizational-political embeddedness theory, which suggests that differential social structures create dependencies, incentives, and opportunities to engage in financial malfeasance. The historical analysis shows that neoliberal policies enacted in the mid-1990s resulted in organizational and political structures that permitted managers to engage in financial malfeasance while limiting the efficiency of regulatory bureaucracies. The quantitative analysis yields mixed findings, many of which are consistent with previous research on white-collar crime and financial malfeasance. This article adds to existing literature by outlining significant public policy shifts and the results those shifts may have on specific industries. These findings have important implications for political officials and corporate oversight organizations.

In the first chapter, I study a recent and important innovation, the shift towards independent compensation consultants that provide advice only to boards. I construct a theoretical model to conceptualize the potential impact of independent consultants and then develop an empirical strategy to quantify the impact. One contribution of the paper is to provide strong identification of the impact of independent advice, something that has been challenged by the lack of appropriate data. I use a unique sample of Canadian firms which allows me to directly measure the impact of non-compensation related consulting fees on compensation advice. I conduct a number of empirical experiments but the main tests exploit a "quasi-natural experiment" provided by the creation of an independent consultant, Hugessen Consulting, as a spin-off from Mercer. I show that switching from an a ffiliated consultant to an independent consultant is associated with an increase in managerial incentives. Despite the benefits of independent advice, independent consultants may not be hired due to higher fees, the influence of powerful CEOs, or because boards already possess adequate expertise. In the second chapter, using a simple model of incentive contracting as a guide, I examine empirically whether some aspects of executive stock option backdating may be an optimal response of firms to distortions in the institutional environment, in particular tax law and accounting rules. Some of the findings suggest that firms may attempt to effi ciently lower the exercise price of the executive options in order to enhance managerial incentives for risk averse and poorly diversified executives. In the presence of restrictive accounting and tax rules, backdating may be a mechanism by which to achieve this objective of better incentives. Consistent with this explanation I find that backdating is associated with lower CEO pay levels but higher CEO incentives. In the final chapter, I use a dynamic structural model to show that on average firms excessively smooth their payout while maintaining larger than optimal levels of cash (excess cash) on their balance sheets. I provide an agency explanation for the positive correlation between dividend smoothing and cash savings. I show that the dynamic effect of managerial perceived cost to cutting payout results in accumulation of excess cash and distortion of shareholder value.

This study investigates the association between CEO severance agreements and corporate tax avoidance. Severance agreements, by providing executives with additional compensation when there is a change in employment status, should serve to encourage additional risk-taking, as reflected by increased tax avoidance activities. Using a large sample of aggregate compensation data, I find some evidence of a relation between the presence of a CEO severance agreement and tax avoidance. Using a smaller sample of hand-collected data, I find a significant negative relation between the magnitude of cash severance pay and tax avoidance and a significant positive relation between the magnitude of equity severance pay and tax avoidance. Overall, this study provides evidence that the structure and magnitude of severance agreements are related to tax avoidance. / Ph. D.

Public criticism of executive pay has increased significantly in recent years. Shareholders express concern that the level of pay to many executives does not match the level of increase in shareholder wealth. The government has even gotten involved in the issue by changing tax laws related to compensation and taking an interest in how compensation is recorded in financial statements. This study investigates the relationship between adoption of compensation components and improved firm performance. Specifically, performance and restricted stock plan adoptions are analyzed for nine industries. Variable change is analyzed pre and post adoption for adopters; these adopters are then compared to non-adopters and to non-adopting peers. Data were gathered from COMPUSTAT and analyzed using four statistical methods; ttests, analysis of variance, multivariate analysis of variance and analysis of means. The study covers 20 years of adoptions and involves 335 adopting firms. Results of the study indicate that, when solely analyzing adopters, adoptions of performance or restricted stock plans improve firm performance for some industries but not for others. The study further indicates for most industry groups, the improvement experienced by adopters is not as significant as the improvement realized by the non-adopting segment of the industry. Lastly, when adopters are compared to non-adopting peers the study finds peers perform as well as or better than adopters. These results imply adoption of restricted stock plans works as intended for some industries by improving firm performance but may not improve performance to the levels reached by the industry as a whole. / Ph. D.

This dissertation presents the results of three experimental research studies investigating factors within the executive compensation process and the effects these factors have on the pay-for-performance paradigm. The first study examines the influence of individual anchoring and the effects of private versus public decisions upon compensation awards by subjects role-playing as either an outside CEO or a non-CEO director. Research results show that subjects anchor to personal pay levels, CEO subjects shield the focal CEO from declining compensation when performance is below average, and that this phenomenon is mitigated when the individual director-subject decision is deemed to be made public. The shielding of compensation is consistent with Social Comparison Theory in that the CEO-subjects identify to and protect the CEO by limiting negative compensation awards of the CEO, and thus, representing an agency cost. The second study examines affect as an influencing factor on individual decision makers in the compensation setting process. Results are consistent with Prospect Theory in that, in the absence of a tangible payoff, personal affect is the outcome monitored and used by individuals in the decision process in the determination of a gain or loss. Using personal pay and personal performance as anchors for subjects role-playing as directors on the compensation committee, results indicate that subjects make decisions to maximize (minimize) positive (negative) affect in compensation awards to the focal CEO. The findings suggest that although individual anchors may interact and add to the complexity of the decision process, the outcomes are consistent with Prospect Theory. The third study examines group decision making as compared to individual decisions when making compensation awards. Results show that in a committee of individuals where a majority of beliefs is present, group polarization occurs and the compensation results are exaggerated as compared to the individual beliefs. The findings also suggest, though, that the appointment of a leader as chair of the committee, either in the majority or minority view, has a moderating effect on the group outcome. These results highlight the potential for agency costs in the group decision process that may be found in the executive compensation-setting environment. Overall, these results add to the knowledge of factors affecting executive compensation. These studies provide evidence that individual anchors, individual performance, individual affect, and the group decision process may add to agency costs and be contributing factors in the imperfection of the pay-for-performance paradigm. / Ph. D.

Yes / This study examines the effects of firm performance and corporate governance on chief executive officer (CEO) compensation in an emerging market, Pakistan. Using a more robust Generalized Method of Moments (GMM) estimation approach for a sample of non-financial firms listed at Karachi Stock Exchange (KSE) over the period 2005 to 2012, we find that both current and previous year accounting performance has positive influence on CEO compensation. However, stock market performance does not appear to have a positive impact on executive compensation. We further find that ownership concentration is positively related with CEO compensation, indicating some kind of collusion between management and largest shareholder to get personal benefits. Inconsistent with agency theory, CEO duality appears to have a negative influence, while board size and board independence have no convincing relationship with CEO compensation, indicating board ineffectiveness in reducing CEO entrenchment. The results of dynamic GMM model suggest that CEO pay is highly persistent and takes time to adjust to long-run equilibrium.

<p>Finns det ett samband mellan belöningssystem och finansiell aktieägartillväxt i publika</p><p>svenska företag? En intressant och högaktuell fråga, som det visade sig, och som kommer</p><p>att försöka besvaras i denna uppsats.</p><p>Inledningsvis undersöktes om det fanns någon relevant svensk statistik som kunde belysa</p><p>de exekutiva ledarnas förtjänstutveckling under senare år. Statistiska Centralbyråns</p><p>inkomststatistik gav inte svar på frågan. LO-ekonomernas statistik visade sig vara relevant</p><p>och bekräftade mitt antagande att inkomstutveckling för denna grupp varit osedvanligt god.</p><p>Med antagandet bekräftad och således stärkt i tron ställdes tre frågor som uppsatsens syfte</p><p>var att besvara:</p><p>Fråga 1 Hur ser de belöningsmodeller ut som tillämpas av svenska företag avseende</p><p>ersättningar till medlemmar i företagens exekutiva ledningsgrupper?</p><p>Fråga 2 Hur förhåller sig de tillämpade belöningsmodellerna till relevant belöningsoch</p><p>motivationsteori?</p><p>Fråga 3 Finns det ett samband mellan aktieägarnas finansiella utveckling i dessa företag</p><p>och företagens belöningar till den studerade yrkesgruppen?</p><p>Lämpliga teorier att applicera på de undersökta företagens belöningsmodeller visade sig</p><p>vara agentteorin och förväntansteorin. Dessa två teorier jämfördes med de fyra undersökta</p><p>företagens, Ericsson, Handelsbanken, IKEA och Skandia belöningssystem genom studier</p><p>av dessa bolags årsredovisningar för åren 2000-2004. Det visade sig härvid att de företag</p><p>(två st.) som hade de högsta belöningsnivåerna redovisade sämst resultatutveckling och</p><p>negativ avkastning till aktieägarna, medan det företag (en st.) med den lägsta</p><p>belöningsnivån, hade en god resultatutveckling och en fördelaktig avkastning till</p><p>aktieägarna. För IKEA var studiematerialet för knapphändigt för att kunna uttala sig om</p><p>hur belöningsnivån utvecklats även om aktieägarens avkastning var den mest fördelaktiga</p><p>bland de undersökta företagen. Samtliga företag, IKEA undantagen, har konstaterats</p><p>ersätta sina exekutiva ledare med grundlön, rörlig lön, anställningsförmåner och</p><p>pensionslösningar även om Handelsbanken uppger att man inte tillämpar rörlig bonus eller</p><p>rörligt tantiem.</p><p>Slutledningsvis konstaterades att det inte i något fall förelåg något samband mellan hur</p><p>företagen ersätter sina exekutiva ledare och aktieägarnas finansiella tillväxt.</p>

Issues as to the suitability of executive compensation packages have obtained an ever increasing profile in recent years. Whilst there has been quite extensive empirical investigation of pay-performance sensitivity, the framework of performance-pay has received less attention in the literature and examination to date. Besides this - whilst there has been a quantum of investigation of relationships between compensation and performance, there has been less focus on case study based analysis. In this context, the current study makes a twofold contribution to the examination of executive directors’ remuneration in FTSE 350 companies. First, this research aims to empirically investigate linkages between the nature and amount of compensation packages and company performance with a particular focus on examining the extent of interrelationships between pay and performance over a ten year period from 1999 to 2008. Within the scope of a variety of theoretical perspectives, this deductive study puts a focus on addressing the question of whether managerial compensation is the greater influence on firm performance or whether it is the latter which has the greater influence on the former. Second, this study seeks to qualitatively add to the relevant literature by means of a longitudinal case study of remuneration at UK based major multi-national company, BP, over a ten year period from 2001 till 2010. Within the context of a variety of theoretical and institutional perspectives, this inductive study explores, by means of investigation of BP’s Directors Remuneration Reports, the role of the BP remuneration committee in setting the mechanisms and structures which determine the nature and extent of executive remuneration packages at BP and considers the wider generalisability of the findings therefrom. Overall the current study utilises a mixed methods approach via a combination both quantitative and qualitative modes of analysis – an approach which is relatively rare in the discipline of research into corporate governance and related issues. The outcomes from the empirical work show evidence of the presence of dual positive associations between executive compensation and company performance. However, the results do indicate that executive compensation is more influential in its effect on firm performance than the framework of performance-related pay. This finding is interpreted as lending support to the stewardship and/or tournament theories as to underlying drivers of executive remuneration in comparison with agency theory, represented by agent-principal or managerial hegemony perspectives, as an explanatory of the construction of executive remuneration and the link with firm performance. Similar to prior literature, the empirical findings indicate that equity-based compensation is more robust in the linkage with firm performance than cash pay dominated packages. However, the results showed that the existence of remuneration committees in general reveals insignificant and negatively related to total CEO/executive remuneration. This finding highlights therefore the need to put a focus on the actual role of compensation committee in setting the type and extent of executive pay packages in a large UK company. The outcomes from the archival case study also suggest that it is difficult to find significant support for a pure agency theory approach whereby shareholders seek to align their interests directly with those of their managers as a driver of executive compensation packages. There is more evidence suggestive of a managerial power/hegemony perspective which is heavily mediated by the presence of powerful non-executive directors and the institutional presence of the remuneration committee. Perhaps the most significant aspects to emerge from the case study are the importance of personal relationships and power at boardroom level. Beyond this the inferences of the supplementary content analysis conducted specifically on the Directors Remuneration Reports are suggestive of a focus on overall BP performance rather than on the specific activities and achievements of individual executive directors. In conclusion, the findings of the present study provide a wealth of detail both quantitative and qualitative as to the manner in which executive remuneration has been set in the UK in recent years and as to linkages both with corporate performance and underlying theories of the determinants of executive remuneration. As such it sheds light on an area of importance and one of continued private and public concern and may be of interest to those responsible for governance within firms and to wider public and regulatory interest as well as future researchers in the field.