Boards of directors of corporations have been criticized for failing to effectively perform their roles of ratifying and monitoring managerial decisions, retaining and terminating top management, and evaluating and rewarding executive performance. critics have suggested that increasing the proportion of outside directors on the board increases independence and improves board effectiveness. Research has provided evidence that the composition of the board affects firm performance, the likelihood of chief executive turnover, and the monitoring of important decisions such as the adoption of poison pills and acquisitions. In this study, the effect of the composition of the board on the relationship between executive compensation and firm performance is investigated. The effect of board composition on the types of performance measures, accounting and stock return, used in the pay-performance relationship is also examined. Data were gathered from publicly available sources, including Forbes compensation surveys, firms’ proxy statements, and COMPUSTAT and CRSP tapes. These data were then statistically analyzed using a regression model with indicator variables for outsider-dominated boards. The types of performance measures, accounting and stock return, were then compared to test whether their usage in the pay-performance relationship differs between outsider-dominated and insider-dominated boards. The results of this study indicate that the association between compensation and stock return measures of performance is stronger when the board is composed of a majority of outside directors. There is no evidence, however, of a stronger association between compensation and accounting measures of performance for outsider-dominated boards. The results also reveal that outsider-dominated boards use both accounting and stock return measures of performance in the pay-performance relationship whereas insiders focus on accounting measures. These results imply that outside directors act in the interests of shareholders by linking compensation to stock return measures as well as accounting measures of performance. These findings are consistent with the conclusions of other board composition studies that outside directors play an important role in the corporate governance process. / Ph. D.

The focus on sustainability has become more noticeable during recent years. This is especially evident in the Nordics, were Sweden, Norway, Denmark and Finland tops the sustainability rankings. Moreover, several studies have been conducted surrounding the topic of the sustainability measuring ESG-scores and their relation to financial performance. Simultaneously, researchers have come up with controversial findings regarding the relationship between financial performance and executive compensation. This study aims to find out the relationship between sustainability and senior executive compensation in the Nordics, as well as how they are both connected to financial performance. In order to fulfill this, eight multiple regression models were created on a sample of 101 Nordic companies. The chosen dependent and independent variables comprised various ESG-scores, as well as a ratio of senior executive compensation divided by total revenue. This resulted in 895 different observations during the years 2008 to 2017. This is a quantitative study following the positivist paradigm. Moreover, a deductive approach is taken in regard to how theory is used. Theories used to make conclusions include the stakeholder theory, the shareholder theory, the legitimacy theory, the agency theory and the stewardship theory. The regression models of choice were the OLS model and the OLS robust model, depending whether the models fulfilled the assumption regarding heteroscedasticity. The findings showed no significant relationship between the ESG combined score and the senior executive compensation ratio in the Nordics. However, a significant negative relationship between the compensation and the social and environmental scores could be found. Moreover, the governance-score was the only ESG-score to indicate a positive relationship with senior executive compensation. Conclusions could be made that there is a negative relationship between senior executive compensation and sustainability factors such as emission reduction and employment quality. This finding is in favor for the shareholders, but not the stakeholders. Additionally, there is a positive relationship between senior executive compensation and good governance. This includes factors such as a high score regarding board structure, shareholder rights and CSR strategy. It could also be concluded that good governance has an indirect positive impact on financial performance. Furthermore, the findings question previous arguments that executive compensation is an agency cost, rather than a solution of the agency problem.

Yes / Guided by academic literature, industry practice and policy recommendations, we analyze a wide range of option and restricted stock plans with exercise and vesting conditions that may be contingent on stock price performance. To assess the effectiveness of these plans at attracting and providing incentives to executives, we create compensation plans with fixed firm cost and executive valuation and calculate their expected total lifetime incentives. We show that performance vesting targets provide the least cost effective incentives, performance exercise targets provide the largest risk incentives, option plans are generally superior to restricted stock plans, and calendar vesting is only efficient up to a maximum of three years. Performance exercise targets can increase the expected total lifetime incentives provided by compensation plans, but in general, standard options with short vesting periods provide the most cost effective pay-for-performance incentives.

Esta investigación apoya el argumento de que las empresas se benefician de la adopción de políticas y estrategias retributivas para sus directivos cuando las características de las mismas se adaptan o adecuan a los requerimientos de control y motivación de los directivos que, en última estancia, vienen impuestos por la orientación estratégica de la empresa y por las características del entorno en el que opera. En este sentido, y en consistencia con la teoría de la agencia, el concepto de discrecionalidad directiva se ratifica como un elemento crucial en la explicación de las relaciones entre retribución directiva y contexto. La empresa diseña el sistema retributivo del directivo en función del grado de discrecionalidad del que éste dispone. Además, el ajuste entre discrecionalidad y retribución directiva tiene efectos positivos en los resultados de la empresa. / This research supports the arguments of that firms obtain benefits of implementing executives' compensation politics linked to supervision and control requirements which are imposed by firms strategic orientations and environment characteristics. In that way, and consistent to agency theory, executive discretion concept is confirmed as a key element in the explanation of relationships between executive compensation and context. Firm design executives compensation system according to the degree of discretion they dispose. Moreover, adjustment between executive discretion and executive compensation has positive effects on firm performance.

Submitted by Marcos Barbosa Pinto (mpinto@gaveainvest.com.br) on 2011-12-21T18:59:41Z No. of bitstreams: 1 Microsoft Word - Dissertacao - Pós Banca - 16122011.pdf: 296612 bytes, checksum: e6c3d7f22d920776865e09918cec73f0 (MD5) / Approved for entry into archive by Marcia Bacha (marcia.bacha@fgv.br) on 2012-01-09T11:24:38Z (GMT) No. of bitstreams: 1 Microsoft Word - Dissertacao - Pós Banca - 16122011.pdf: 296612 bytes, checksum: e6c3d7f22d920776865e09918cec73f0 (MD5) / Made available in DSpace on 2012-01-09T11:24:57Z (GMT). No. of bitstreams: 1 Microsoft Word - Dissertacao - Pós Banca - 16122011.pdf: 296612 bytes, checksum: e6c3d7f22d920776865e09918cec73f0 (MD5) Previous issue date: 2011-11-10 / Este trabalho procura identificar a relação entre dispersão da propriedade acionária e remuneração de executivos. A literatura sugere que, devido a problemas de ação coletiva e custos de agência, companhias com propriedade acionária mais dispersa tendem a remunerar melhor seus executivos. Utilizando dados disponíveis pela primeira vez no Brasil, este trabalho procura testar essa hipótese. Os testes econométricos realizados, com base em uma amostra de 315 companhias abertas brasileiras cujas ações são admitidas à negociação em bolsa de valores, evidenciam uma forte correlação, positiva e estatisticamente significante, entre a remuneração dos administradores e a dispersão acionária. O trabalho conclui que, ceteris paribus, companhias com propriedade acionária mais dispersa pagam remuneração maior a seus administradores. / The aim of this study is to identify the relationship between ownership dispersion and executive compensation. The literature suggests that, as a result of collective action problems and agency costs, companies with dispersed ownership tend to pay higher compensation to their executives. Using data available for the first time in Brazil, this study tries to test this hypothesis. The econometric tests conducted, using a sample of 315 public companies listed in the Brazilian stock exchange, suggest a strong correlation, positive and statistically significant, between executive compensation and ownership dispersion. This study concludes that, ceteris paribus, companies with dispersed ownership pay higher compensation to their executives.

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Increasing compensation disclosures mandated by the Securities Exchange Commission provide transparency that allows more shareholders to question the results produced by highly compensated executives. The popular business press often decries the apparent imbalance between executive pay and firm performance. Published academic research has responded with hundreds of studies attempting to explain executive pay in terms of firm performance. The preponderance of these studies focus on Chief Executive Officers. This study empirically examines executive compensation for team effects on future firm performance.Applying a firm specific fixed-effects model to a sample of 13,021 firm-year observations from ExecuComp, the current study regresses top management team compensation and control variables on firm performance averaged one, three, and five years following the year of compensation. One accounting based measure of performance (return on assets) and one market based measure of firm performance (shareholder return) is examined over the one three and five year horizons.Consistent with increasing concerns raised by investors regarding excess executive pay, this study finds evidence that higher top management team pay is associated with companies experiencing lower rates of return in the future. However, higher management team pay is associated with higher profits and market value measured in dollars. Theses effects are significantly different between the short-term and long term components of compensation. Although compensation of the team is highly correlated with the CEO, the compensation of the executive team has incremental effects on future firm performance of the company.This study contributes to the executive compensation literature by providing evidence that the compensation of the top management team affects future company performance. The observed impact of management team compensation on company performance is: incremental to CEO effects noted in prior studies, differential between short- and long-term components of compensation, sensitive to the proxy used for company performance, and attenuates over time. These findings suggest that further research on executive management team compensation is merited in order to address an interesting gap in the extant literature.

Charles University in Prague Faculty of Social Sciences Institute of Economic Studies Title Page MASTER'S THESIS Executive Compensation in Firms Producing Addictive Goods Author: Bc. Michael Janský Supervisor: Jiří Novák, M.Sc., Ph.D. Academic Year: 2014/2015 Abstract This thesis investigates executive compensation, turnover and migration patterns in firms that produce addictive goods (tobacco, alcohol, and gambling). Previous research has identified costs associated with the production of harmful goods specific to these industries. Consistent with this stream of research, I find increased executive compensation in tobacco, alcohol, and gambling firms. This finding seems to be driven by industry specific characteristics, rather than by executives' traits or by the 'traditional' determinants of executive compensation. Executive migration patterns and the effect of job change on compensation indicate that the higher compensation is not caused by executives' attributes well suited for these firms' specific needs, by executives' contribution to value-creating activities, or by other executive-specific characteristics. Rather, the higher compensation seems to reflect a payment to executives for having to bear society's aversion to or displeasure with these harmful goods, and those who produce them. JEL...

Thesis advisor: Ronnie Sadka / This dissertation is comprised of three essays which examine the ramifications of executive compensation incentive structures on corporate outcomes. In the first essay, I present evidence which suggests that executive compensation convexity, measured as the sensitivity of managerial equity compensation portfolios to stock volatility, predicts firm-specific crashes. I find that a bottom-to-top decile change in compensation convexity results in a 21% increase in a firm's unconditional ex-post idiosyncratic crash risk. In contrast, I do not find robust evidence of a symmetric relation between compensation convexity and a firm's idiosyncratic positive jump risk. Finally, I exploit exogenous variation in compensation convexity, arising from a change in the expensing treatment of executive stock options, in buttressing my interpretations within a natural experiment setting. My results suggest that managerial equity compensation portfolios do not augment a firm's future idiosyncratic crash risk because they link managerial wealth to equity prices, but rather because they tie managerial wealth to the volatility of a firm's equity. In the second essay, I exploit an exogenous negative shock to CEO compensation convexity in examining the differential ramifications of option pay and risk-taking incentives on the systematic and idiosyncratic volatility of the firm. I find new evidence that is largely consistent with the notion that compensation convexity, stemming from option convexity, predominantly incentivizes under-diversified risk-averse CEOs to increase the value of their option portfolios by increasing the systematic volatility of the firms they manage. I hypothesize that this effect manifests as systematic volatility is readily more hedgeable than idiosyncratic volatility from the perspective of risk-averse executives who are overexposed to the idiosyncratic risk of their firms. If managers use options as a conduit through which they can gamble with shareholder wealth by overexposing them to suboptimal systematic volatility, options are not serving their intended contracting function. Instead of decreasing agency costs of risk, by encouraging CEOs to adopt innovative positive NPV projects that may be primarily characterized by idiosyncratic risk, option pay may have contributed to the same frictions it was intended to reduce. In the third essay, I present evidence that is consistent with the notion that certain managerial debt-like remuneration structures decrease the likelihood of firm-specific positive stock-price jumps. Namely, I find that a bottom-to-top decile increase in the present value of CEO pension pay leads to a roughly 25\% decrease in a firm's unconditional ex-post jump probability. However, I do not find that CEO deferred compensation decreases firm jump risk. Finally, I find that information in option-implied volatility smirks does not appear to reflect these dynamics. Together, these results suggest that not all debt-like compensation mechanisms decrease managerial risk-taking equally. / Thesis (PhD) — Boston College, 2015. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.

Made available in DSpace on 2015-03-05T19:14:41Z (GMT). No. of bitstreams: 0 Previous issue date: 24 / Nenhuma / O objetivo deste estudo foi verificar se as formas de remuneração dos executivos das Companhias Latino-Americanas influenciam o gerenciamento de resultados contábeis. Realizou-se uma análise empírica de 48 empresas, de 4 diferentes países latino-americanos em um período de 5 anos (entre 2002 e 2006), perfazendo um total de 240 observações. Para verificar a ocorrência de gerenciamento de resultados nas companhias latino-americanas, foi adotado o modelo Kang e Sivaramakrishnan (1995). Os testes estatísticos utilizados foram: U Mann-Whitney e Teste Wald. Os resultados do estudo indicaram indícios de maior nível de gerenciamento de resultados nas empresas que fornecem remuneração não fixa aos seus executivos. / The objective of this study was to determine whether the forms of compensation for executives of companies Latin American influence earnings management. There was an empirical analysis of 48 companies, of 4 different Latin American countries in a period of 5 years (between 2002 and 2006), which totaled of 240 observations. To check the occurrence of earnings management in Latin American companies, the model adopted was Kang and Sivaramakrishnan (1995). The statistical tests used to the validity of regressions were: Mann-Whitney U test and Wald. The findings the study showed signs of greater level of earnings management in companies that ofter variable pay to their executives.