abstract: Chief Executive Officers (CEOs) whose observed personal option-holding patterns are not consistent with theoretical predictions are variously described as overconfident or optimistic. Existing literature demonstrates that the investment and financing decisions of such CEOs differ from those of CEOs who do not exhibit such behavior and interprets the investment and financing decisions by overconfident or optimistic CEOs as inferior. This paper argues that it may be rational to exhibit behavior interpreted as optimistic and that the determinants of a CEO’s perceived optimism are important. Further, this paper shows that CEOs whose apparent optimism results from above average industry-adjusted CEO performance in prior years make investment and financing decisions which are actually similar, and sometimes superior to, those of unbiased CEOs. / Dissertation/Thesis / Doctoral Dissertation Business Administration 2016

To empirically test the impact of CEOs' outside wealth on their compensation, I use spousal divorce as a proxy for an exogenous, negative shock to a CEO's outside wealth. I hypothesize that this shock decreases a CEO's risk tolerance. I also expect that the board of directors responds to this decrease by raising the CEO's cash compensation and by increasing the sensitivity of the CEO's compensation to changes in firm value. I find that cash bonuses, restricted stock grants, and option grants increase following a CEO's divorce, consistent with boards reacting to changes in CEOs' outside wealth and risk incentives. I also find that firms' total risk and idiosyncratic risk significantly drop during the year of a CEO's divorce, consistent with a drop in the CEO's risk tolerance. Overconfident CEOs, who are more risk tolerant, do not receive the same increases in compensation following divorce. I find little support for the relation between divorce and compensation being endogenously determined by performance or by poor corporate governance. Overall, the results support predictions that the board of directors takes the CEO's wealth into account when setting compensation and that outside wealth impacts the CEO's risk preferences.

The compensation of chief executive officers has long been an alluring and controversial topic, especially in light of the rapid rise in CEO earnings over the past several decades, which has provoked discussion on the manner in which CEOs are monetarily rewarded. Recently, university presidents have joined company CEOs in the public spotlight, as increasing levels of compensation for college presidents have also sparked scrutiny and debate. This paper examines the determinants behind CEO compensation and investigates the extent to which insights on these factors compare to the compensation determinants of chief executives at universities. Ultimately, this study finds similarities between the determinants of compensation for these two executive groups, specifically in the significance of organization size, type, and performance, as well as personal executive characteristics such as gender and tenure. The findings therefore suggest that these executives have similar job responsibilities, and the results also possess important insights and applications to relevant issues regarding executive compensation.

This thesis examines the relationship between Chief Executive Officer (CEO) origin and performance consequences in a New Zealand (NZ) setting. The NZ setting is unique because previous research on this topic is from the United States (US) and in one instance the United Kingdom (UK); and the NZ setting is intriguing because it has four important institutional differences: NZ directors hire outsiders much more frequently than their US and UK counterparts; NZ has no discernible trend in the frequency of outsider appointments over time, whereas the US has a marked upward trend; average CEO tenure in NZ is much shorter than that observed in the US or globally; and CEO succession occurs in relatively small firms. These four differences suggest that the NZ CEO market has some unique dynamics and perhaps unique performance consequences. This thesis fills a gap in our knowledge of executive and director practice in NZ and contributes to the CEO origin debate by analysing a new setting. Using a hand collected sample of 162 CEO appointments from NZ firms between 1991 and 2008, I find some significant performance differences between insider and outsider CEOs. Outsiders elicit a higher abnormal return around the appointment announcement: the 1-day and the 3-day differentials are approximately 1.2% and 1.7% respectively. In contrast, insiders create more shareholder wealth during their first three years in charge: insiders increase the appointing firm’s market-to-book ratio by approximately 27 percentage points more than outsiders. I also discover that insiders are around 37 percentage points more likely to last at least three years in the job. The main difference between these findings and those from the US and UK is that insiders easily outperform outsiders in the medium term. Also, I document an intuitive finding for grey insiders: grey insiders by definition possess a blend of insider and outsider attributes and perform between insiders and outsiders on all three performance measures. These findings are robust to various controls and subsamples, and there is also some evidence that the market-to-book finding is robust to selection bias.

Background/Problem: The financial crisis in 2008 affected the whole economy and the CEO's compensation was one of the factors causing this crisis. Although, it is now years after the onset of the financial crisis, the CEO’s compensation is still an ongoing topic of debate and, for this reason, vital to study. According to literature, non-family CEOs are more likely to emphasize financial performance rather than socioemotional objectives and returns. On the contrary, family CEOs are more motivated by socioemotional wealth and non-financial goals. Taking these viewpoints into consideration, this study examines how CEOs in family firms view and value compensation and rewards. Purpose: This study aims to explore how family CEOs view and value compensation and rewards, in comparison to non-family CEOs in family firms. Method: This study is conducted using a qualitative method and utilizing semi-structured interviews. Five family firms participate in this study and they comprise of 4 family CEOs and 1 non-family CEO. Conclusion: The findings of this study support the idea that family CEOs view and value compensation and rewards in other terms than just financial value. Moreover, the evidence points to that the non-family CEO is more connected to financial factors. Weighing together the evidence from this study there is a difference regarding how family CEOs and non-family CEOs view and value compensation and rewards. Additionally, based on this research, SEW exists within family firms. The findings in this study contribute to the current knowledge in designing compensation packages for CEOs in family firms. Moreover, this study is the first step towards enhancing our understanding of how CEOs view and value compensation and rewards.

Företag är av stor vikt för det svenska samhället. Presterar de dåligt, drabbar det inte enbart den svenska ekonomin utan även de anställda och deras liv. De senaste åren har antalet noterade aktiebolag på Nasdaq Stockholm ökat, ökningen medför att företagens intressenter blir allt fler. Det är därför även viktigt för aktieägarna att företagen leds av den mest lämpade VD:n och presterar optimalt. I tidigare forskning har det observerats att faktorer såsom lön, kön samt företagsspecifik erfarenhet kan påverka VD:ns agerande och således även företagets prestation. Motstridiga resultat har presenterats mellan företagets prestation och kön samt företagsspecifik erfarenhet, samtidigt som positiva resultat observerats mellan prestationen och lön. Covid-19 har varit brännande aktuellt de senaste åren och en mängd åtgärder har införts från den svenska staten. Forskning från andra länder har konstaterat att företagens prestation har påverkats negativt av Covid-19 pandemin. Vidare har det observerats från tidigare kriser som drabbat den svenska ekonomin, att egenskaper som VD:n besitter haft en stor påverkan på hur företaget klarat sig under kriserna. Detta examensarbete ämnar därmed att undersöka hur de svenska företagens prestation har påverkats av Covid-19, samt om VD:ns egenskaper i form av lön, kön samt företagsspecifik erfarenhet har någon koppling till hur företaget presterar under denna ekonomiska kris. Examensarbetet präglas av en kvantitativ metod där publika företag på Nasdaq Stockholm har legat till grund för studien. Ett antal företag har exkluderats på grund av avgränsningar samt bortfall. Slutligen har det resulterat i att 277 företag observerats under åren 2017 till 2020. Resultaten som återfunnits har visat på att det inte finns något signifikant samband mellan Covid-19 och företagets prestation, däremot finns det tendenser som tyder på detta. Dessutom har det observerats att vissa egenskaper hos VD:n har olika betydelse beroende på om företaget befinner sig i en tid med Covid-19 eller ej. Resultatet visar på att VD:ns kön har större betydelse för prestationen under Covid-19. Detta pekar på att en manlig VD bidrar till ett högre resultat under Covid-19 än vad kvinnliga gör, vilket inte går att konstatera för perioden innan. Däremot är det tydligt att företagen presterar bättre både innan samt under Covid-19, om VD:n har en lång företagsspecifik erfarenhet. Avslutningsvis kunde det observeras att den totala lönen har ett svagt negativt samband med företagets prestation innan men inte under Covid-19.

Abstract 1: In this paper, we investigate the effects of internal corporate governance on the length it takes to remove a CEO after the initial sign of poor firm performance. We find that firms that have a better quality of internal corporate governance are quicker to remove poor-performing CEOs. This result persists after controlling for other factors that might influence the CEO removal decision. Abstract 2: Employing a sample of voluntary CEO turnovers selected from S&P 500 firms over the period 2004-2009, I investigate the impact prior firm performance on a CEO’s potential of being hired on an equivalent job in a similar company. I find that the better the performance of the previous firm, the quicker is CEO being hired. In other words, the better the previous firm performance, the better is the CEO’s potential to a land a similar job faster. The result prevails even in the presence of control variables, such as the CEO’s education, tenure, age and gender. The better performers in previous firms also seem to yield greater improvement in performance of their new employers.

This dissertation is a series of study on CEO turnover, succession, and compensation, which consists of three essays. In essay 1, I investigate how the Sarbanes-Oxley Act (SOX) affects CEO tenure and the characteristics of CEO turnover. I do not find a significant relation between financial reporting and CEO turnover even though SOX enforces accurate financial reporting and personal responsibilities. However, I find SOX affects CEO turnover via the changes to corporate boards. I provide some evidence supporting the idea that intensified monitoring significantly reduces CEO tenure. Specifically, I find SOX significantly affects the relation between CEO tenure and the independence of the board. I find that the likelihood of forced CEO turnover is higher in the post-SOX period. I also document that intensified monitoring increases the likelihood of forced turnover, specifically, I find CEO power concentration, institutional ownership, negative news, and shareholder governance proposals significantly affect the odds of forced turnover. I also provide some evidence supporting the hypothesis that firm performance is inversely related to forced CEO turnover. I document that the average number of audit committee meetings significantly increased in the post-SOX period, and the interaction between the number of audit committee meetings and firm performance significantly increase the likelihood of forced CEO turnover. Overall, the results support the notion that SOX affects boards' decisions on CEO turnover. I do not find that the proportion of outside directors significantly affects the odds ratio of forced turnover, indicating outside dominated boards may not be effective in removing CEOs. Managerial discretion defines the working environment of a manager and could potentially affect a board's choice of a successor CEO. In essay 2, I hypothesize that boards tend to appoint younger (older) CEOs in firms with high (low) managerial discretion. I further propose that the relation between managerial discretion and successor CEO age may be moderated by the age of board members, the origin of the successor, and the successor's designated heir status. Using a sample of 629 successions occurring between 1994 and 2005, I find empirical evidence that supports my first hypothesis for the total sample and the sample of successions with voluntary turnover. Board age, successor origin, and the successor's designated heir status do not moderate the results for the total sample. However, I find that board member age and designated heir status moderate the relation between managerial discretion and CEO age following forced turnover. Following voluntary turnover, successor origin and designated heir status moderate the result. The above mentioned three board and CEO characteristics may either strengthen or weaken the link between managerial discretion and CEO age depending on how the incumbent CEO leaves the CEO position. In addition, several other factors also statistically affect boards' decisions regarding CEO age, including governance, CEO board tenure, and titles held by the successor. In essay 3, I examine the role of managerial discretion in setting CEO pay at succession. Using a sample of 656 successions from 1994-2005, I provide evidence that a successor CEO's pay level is positively and significantly associated with the level of managerial discretion. However, outside succession moderates the link between managerial discretion and pay level. I further find that the moderating effect of a successor's origin is contingent upon the bargaining power of the board of directors for the total and forced turnover samples. As for the pay structure of a successor, the results of the total sample and forced turnover subsample provide evidence that managerial discretion positively relates to the proportion of risk-based pay and outside succession has a moderating effect on this relation; and the moderating effect depends on the board bargaining power. As for the voluntary turnover sample, the pay structure of the new CEO is mainly determined by the pay structure of the predecessor, firm performance, and the board bargaining power. This study enriches existing research on managerial discretion and succession by linking CEO bargaining power at succession with the theory of managerial discretion.

Background: Formal CEO board membership is a unique feature of Swedishboards. The share of firms having Formal CEO board membership hassignificantly decreased in the last 20 years and thus, this feature might haveevolved to be used as a signal of high CEO quality. CEO quality is in turnlikely to, through Formal CEO board membership, serve as a moderator of therelationship that both CEO power and CEO discretion has to firm performancewhich has previously been somewhat ambiguous. Purpose: The purpose of this study is to explain how the CEO’s power anddiscretion is related to firm performance and if this relation is moderated byFormal CEO board membership. Method: To fulfill the purpose of this thesis, a deductive research approachwas used. The theoretical model used is built on four theories namely,Stewardship theory, CEO power, CEO discretion and Signaling theory. With a five-year interval stretching between 1998 to 2018, the quantitative empiricalmethod relies on compensation and financial data from Swedish firms. Conclusion: The results indicate that the relation that both CEO power andCEO discretion have to firm performance, consistent with the theoreticalmodel, is positive. The results further indicate that Formal CEO boardmembership as a signal of CEO quality can moderate these relationships. Thisfinding is, however, exclusive to the years after 2008.

Orientation: CEO remuneration has attracted attention over the past two decades, with significant renewed interest in light of the role it is said to have played in contributing to the global financial crisis. At the heart of the issue is the perceived weak relationship between corporate performance and CEO remuneration.Research purpose: The purpose of this study was to describe the relationship between corporate performance and CEO remuneration within the South African financial services industry.Motivation for the study: The motivation for the study was to develop a deeper understanding of the relationship within the South African context, as South African banks have remained stable and profitable through the financial crisis.Research design approach and method: The research was a quantitative, archival study, conducted over a six year time period. The primary statistical techniques used in the study included: bivariate regression analysis, multiple regression analysis, and analysis of variance.Main findings/results: The primary finding was that the relationship between corporate performance and CEO remuneration is favourable (moderate to strong), but has experienced a decline. This finding emphasises the impact that macroeconomic trends have on the relationship and the role of managerial power during periods of economic uncertainty.The research further describes the structural changes in CEO remuneration with a shift away from variable pay.Practical managerial implications: The results suggest that the use of discretion and the growing impact of managerial power will be key challenges that iii remuneration committees will face in maintaining a favourable relationship between the two constructs in the future.Contribution/value add: The study provides context to CEO remuneration within a South African framework. It further provides provides a key insight that the relationship between corporate performance and CEO pay is highly dependent on the macroeconomic environment, and that CEO pay in the South African financial services is experiencing structural changes. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted