This study concerns itself with executive share option plans that have earnings per share targets and examines whether the existence of such vesting criteria results in opportunistic behaviour by managers or represents efficient contracting. Accounting choices by management are studied to see whether earnings per share targets in various executive remuneration components are associated with (1) the disclosure of alternative earnings per share, (2) earnings management defined as abnormal working capital accruals and (3) earnings management defined as meeting or beating analysts' forecasts. To begin with, the current study tests for an association between the disclosure of alternative earnings per share figures and earnings per share performance criteria in executive share options. Following Healy (1985) it is argued that situations might exist where executives are aware they will not meet the target or will overshoot the target giving rise to incentives to manage earnings downwards. There are also situations where executives expect to miss the target but have incentives (and scope) to manage earnings upwards. The study then proceeds to measure earnings management using a modified Jones (1991) model. A proxy for target growth in earnings per share is developed. The third and final section of the current study considers meeting or beating analysts' forecasts as the earnings management metric. Prior research provides evidence that meeting or beating analysts' forecasts is rewarded by the stock market and as the payout from executive share options is linked to share price, executives have incentives to meet or beat analysts' forecasts.Regression analysis, in the form of either logit or ordinary least squares is employed in all three sections of this study. The results suggest that earnings management is associated with earnings per share vesting targets in executive share option plans. Moreover, the findings as a whole suggest that the introduction of earnings per share targets as a vesting criterion in executive share options resulted in opportunistic behaviour by management.This thesis adopts an agency theory framework and contributes to the literature on corporate governance and executive remuneration by identifying a specific contractual setting where management is especially sensitive to reported earnings numbers. This particular setting is novel. Additionally, the research design facilitated the testing of whether or not executive share options with an earnings per share growth target result in opportunistic behaviour on the part of managers or represent efficient contracting.

This study examines the role of three institutional factors (regulative; normative and cultural-cognitive pillars of institutions) in addressing agency problems of Australia. In the wake of the series of corporate collapses of current decade, director and executive remuneration was identified as one of the major causes behind these scandals. The Australian government and other related organisations made both regulative and non-regulative institutional reforms to manage this agency conflict. These reforms, encapsulated in Corporate Law Economic Reform Program (CLERP) Act 2004 demanded an increased level of disclosure of director and executive remuneration particularly, the disclosure of performance based salary. Subsequently, these amendments provided an opportunity through a non-binding vote to shareholders to participate in executive remuneration decisions. This study proposes a new synthesis of institutional and agency theories by examining how institutional interventions addresses agency conflicts in the Australian context. A conceptual model is developed to measure both the conjoined and distinctive institutional impact on the disclosure level of director and executive remuneration in Australia. To measure and quantify the aforementioned impact a mixed method research strategy was used. First, content analysis as an investigative tool was used to develop a disclosure index which determined the level of disclosure of director and executive remuneration from top 100 Australian listed entities. Second, a conceptual model, positing the relationships between independent and dependent variables was verified through an econometric analysis of collected data, performed through the Statistical Package for the Social Sciences version 15. The findings of this research reveal that there exists a significant difference between the levels of disclosure in the pre and post stages of the introduction of the CLERP Act 2004. This result highlights the significance of regulatory intervention in addressing agency conflicts. The study also indicates that regulative and normative pillars have a higher impact than the culture-cognitive pillar on disclosure practices of Australian firms. In light of these results, the new blend between agency and institutional theories highlight the role of different institutions, particularly the government, in stabilising the organisational practices for good governance and creating national competitive advantages.

Purpose: This PhD research examines how two different institutional logics of corporate governance have shaped the discourse on executive remuneration. Corporate Logic implies executives are intrinsically motivated and will act in the best interests of shareholders as long as their total remuneration is competitive and fair. On the other hand, Investor Logic implies executives are extrinsically motivated (opportunistic) and will only act in the best interests of shareholders if short- and long-term incentive schemes are designed appropriately. Approach: The research has an interpretive methodology and consists of three phases. First, the diffusion of both Logics is examined through a content analysis of a large sample of corporate governance codes of practice and corporate annual reports. Second, how both Logics are embedded in the remuneration principles and practices that are recommended by code issuers and adopted by companies is scrutinised using discourse analysis. Third, how both Logics have shaped the beliefs and decision-making of non-executive directors, executives, and others is studied using discourse analysis. Findings: Both Logics are embedded in the discourse on executive remuneration, although there has been a strengthening of Investor Logic over time. Both Logics co-exist as distinct from compete in the discourse because it has become taken-for-granted that executives should be remunerated comparably to other executives (Corporate Logic) and in line with shareholder returns (Investor Logic). Directors and others manage tension between Corporate Logic and Investor Logic by prioritising (or ordering) the Logics. Theoretical implications: The research shows how competitive and institutional pressures influence how remuneration decisions are made and reported. However, institutional change is complex because companies influence and are influenced by code issuers and others. Practical implications: As both Logics are embedded in the beliefs of companies, code issuers and others, executive remuneration practices have become unnecessarily complex and convoluted. The case for a simpler approach to executive remuneration is advanced.

This study examines the role of three institutional factors (regulative; normative and cultural-cognitive pillars of institutions) in addressing agency problems of Australia. In the wake of the series of corporate collapses of current decade, director and executive remuneration was identified as one of the major causes behind these scandals. The Australian government and other related organisations made both regulative and non-regulative institutional reforms to manage this agency conflict. These reforms, encapsulated in Corporate Law Economic Reform Program (CLERP) Act 2004 demanded an increased level of disclosure of director and executive remuneration particularly, the disclosure of performance based salary. Subsequently, these amendments provided an opportunity through a non-binding vote to shareholders to participate in executive remuneration decisions. This study proposes a new synthesis of institutional and agency theories by examining how institutional interventions addresses agency conflicts in the Australian context. A conceptual model is developed to measure both the conjoined and distinctive institutional impact on the disclosure level of director and executive remuneration in Australia. To measure and quantify the aforementioned impact a mixed method research strategy was used. First, content analysis as an investigative tool was used to develop a disclosure index which determined the level of disclosure of director and executive remuneration from top 100 Australian listed entities. Second, a conceptual model, positing the relationships between independent and dependent variables was verified through an econometric analysis of collected data, performed through the Statistical Package for the Social Sciences version 15. The findings of this research reveal that there exists a significant difference between the levels of disclosure in the pre and post stages of the introduction of the CLERP Act 2004. This result highlights the significance of regulatory intervention in addressing agency conflicts. The study also indicates that regulative and normative pillars have a higher impact than the culture-cognitive pillar on disclosure practices of Australian firms. In light of these results, the new blend between agency and institutional theories highlight the role of different institutions, particularly the government, in stabilising the organisational practices for good governance and creating national competitive advantages.

Magister Commercii - MCom / As a result of high economic inequality, widespread discontent with excessive chief executive officer (CEO) compensation levels is acute in South Africa (SA). Some commentators argue that instead of high levels of CEO pay causing inequality, it may be part of the solution if higher levels of CEO compensation translate into better company performance, so reducing unemployment. International studies investigating the relationship between CEO short-term cash compensation and current company performance generally report a weak or no relationship where accounting based measures of performance are used. Developments in the international literature reflect a stronger relationship when long-term incentive compensation (LIC) is included and total shareholder return (TSR) used to measure company performance. However, a concerning negative association between the highest paid CEOs in terms of excess LIC and future abnormal TSR is reported. In contrast, SA pay-performance research is largely not reflective of the developments in the international literature, with local studies mostly finding no pay-performance relationship, except where size-related accounting measures are used. As a result of the strong correlation between CEO pay and company size reported in the international literature, and local studies not adequately controlling for company size, the accuracy of the conclusions drawn in prior studies on the pay-performance sensitivity relationship in SA are brought into question. This study addresses the gaps in the SA literature by investigating the relationship between the size-adjusted excess CEO compensation and future abnormal TSR for the top 100 SA companies listed on the Johannesburg Stock Exchange for the period 2011 to 2013. A positive relationship is found between future abnormal TSR and short-term cash compensation, but not LIC. The levels and structure of CEO compensation in SA is also described.

The research will compare the alignment of the remuneration between United States and South African banks with respect to the Economic Value Added, a measure of a firm's economic profit that adjusts profit by subtracting the cost of capital.South African banks have been widely recognised for their high standard of corporate governance and stability during the financial crisis. Executive remuneration based on short-term equity has been recognised by both academic literature as well as bank regulators as one of the causes of the financial crisis. The research seeks to understand the differences in remuneration alignment between the failed and surviving banks.Misaligned incentives within the United States banks are accepted by both academics and regulators as one of the causes of the 2008 financial crisis and subsequent economic downturn. This research puts this theory to the test by comparing the alignment of executive remuneration between South African banks that were internationally recognised for successfully navigating the financial crisis, and the largest United States banks, of which three failed catastrophically over the same time period.The remuneration for the largest United States and South African banks is tested for correlation against Economic Value Added (EVA®), share price and return on equity. Correlation between executive remuneration and the constructs is tested between the two countries before as well as after the financial crisis.South African bank executive remuneration correlated strongly with EVA® and this correlation strengthened after the financial crisis. In comparison, the United States sample banks exhibited strong correlation between share price and remuneration before the financial crisis. The failed United States banks had no correlations between executive remuneration any of the constructs, a pattern that has been repeated in the United States Banks that have survived the financial crisis.Practically, the research demonstrated the vast differences in executive remuneration alignment between the United States and South Africa. In South African banks, executive remuneration is far more closely aligned to EVA®, whereas the United States banks only correlated with share price before the financial crisis, raising the question of whether managers are able to exert excessive power. The research demonstrates the magnitude of the gap between the recommendations of regulators and remuneration policies, with South African banks far more closely aligned than their United States counterparts.The research findings concur with theory presented in literature that misaligned incentives based on equity contributed towards the financial crisis. Of particular concern is the change in remuneration correlation after the financial crisis, where South African banks increased correlation with EVA® while United States banks no longer correlated with EVA®, ROE or share price. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

Corporate governance and executive remuneration are not new phenomena, but have erupted to the forefront of corporate, academic and public attention as a result of a series of well publicized corporate collapses and scandals over the last decade, which have raised both a curiosity of executive remuneration levels, and an awareness of the potential impact of conflicts of interest between owners and executives in modern corporations. Although literature on corporate governance and executive remuneration in general is plentiful, there is a lack of comment on the relationships between certain specific components of these two broad constructs. These specific components, such as disclosure, executive remuneration and governance needed to be analysed individually before they could be combined into a whole that explains both their interrelationships with each other and the larger corporate governance sub-system, and ultimately in the corporation, as an organisational system. In view of greater globalisation of the world economy, and the market for executive talent, the consequent reforms in the fields of corporate governance and executive remuneration, as well as the changing competitive dynamics of modern corporations, it was necessary to examine whether traditional theory and regulatory frameworks have kept pace with corporate development. A review of both classic and current literature show vastly different approaches to both executive remuneration and corporate governance mechanisms practiced around the world. There is however a noticeable trend towards convergence of these different sub-systems.The most prominent differences in respect of these sub-systems relate to the extent to which disclosures are made. Some of these issues relate to full or limited disclosure, internal or external corporate governance measures to regulate executive remuneration, and differences in respect of a narrow shareholder focus or broad stakeholder focus of different interests in an organisation. / Business Leadership / Ph.D. (Business Leadership)

Corporate governance and executive remuneration are not new phenomena, but have erupted to the forefront of corporate, academic and public attention as a result of a series of well publicized corporate collapses and scandals over the last decade, which have raised both a curiosity of executive remuneration levels, and an awareness of the potential impact of conflicts of interest between owners and executives in modern corporations. Although literature on corporate governance and executive remuneration in general is plentiful, there is a lack of comment on the relationships between certain specific components of these two broad constructs. These specific components, such as disclosure, executive remuneration and governance needed to be analysed individually before they could be combined into a whole that explains both their interrelationships with each other and the larger corporate governance sub-system, and ultimately in the corporation, as an organisational system. In view of greater globalisation of the world economy, and the market for executive talent, the consequent reforms in the fields of corporate governance and executive remuneration, as well as the changing competitive dynamics of modern corporations, it was necessary to examine whether traditional theory and regulatory frameworks have kept pace with corporate development. A review of both classic and current literature show vastly different approaches to both executive remuneration and corporate governance mechanisms practiced around the world. There is however a noticeable trend towards convergence of these different sub-systems.The most prominent differences in respect of these sub-systems relate to the extent to which disclosures are made. Some of these issues relate to full or limited disclosure, internal or external corporate governance measures to regulate executive remuneration, and differences in respect of a narrow shareholder focus or broad stakeholder focus of different interests in an organisation. / Business Leadership / Ph.D. (Business Leadership)

Submitted by ALISSON YI CHIEN CHEN (alissonchen@yahoo.com) on 2012-06-16T02:29:58Z No. of bitstreams: 1 Dissertação Alisson Chen Yi Chien.pdf: 651264 bytes, checksum: 7c07dd05427239f9c2811c19a5dcd894 (MD5) / Approved for entry into archive by Vitor Souza (vitor.souza@fgv.br) on 2012-06-18T16:22:07Z (GMT) No. of bitstreams: 1 Dissertação Alisson Chen Yi Chien.pdf: 651264 bytes, checksum: 7c07dd05427239f9c2811c19a5dcd894 (MD5) / Made available in DSpace on 2012-06-25T17:23:47Z (GMT). No. of bitstreams: 1 Dissertação Alisson Chen Yi Chien.pdf: 651264 bytes, checksum: 7c07dd05427239f9c2811c19a5dcd894 (MD5) Previous issue date: 2012-05-21 / The aim of this study is to identify the relationship between firm value and performance and executive remuneration. In general, the literature suggests that firms with executive higher remuneration tend to have better value and performance in comparison with companies with lower remuneration. We analyze a unique Brazilian database to test this hypothesis. The analysis of 420 Brazilian companies from 2002 to 2009 indicates a positive and significant relation between executive remuneration and firm value (price-to-book), suggesting that companies that pay better executive remuneration have higher value. On the other hand, there is no significant relation between executive remuneration and operational performance (ROA and sales growth). / Este trabalho tem como objetivo identificar se a remuneração dos executivos afeta o valor e desempenho das empresas. Em geral, a literatura sugere que companhias que melhor remuneram seus administradores tendem a apresentar um valor e desempenho superior. Utilizando dados inéditos no Brasil, este trabalho procura testar essa hipótese. A análise de 420 companhias abertas brasileiras no período de 2002 a 2009 indica que existe uma relação positiva e significativa entre remuneração executiva e valor da empresa (price-to-book), ou seja, empresas que pagam mais a seus executivos possuem maior valor de mercado. Por outro lado, não existe evidência significativa que empresas que melhor remuneram seus executivos apresentam um melhor desempenho operacional (retorno sobre ativos e crescimento de vendas).

This thesis deals with stock options as a form of executive compensation of a joint stock company. The aim of the thesis was to clarify the reasons that lead companies to decide to reward the executive with stock options, to find out what positive and negative consequences such a decision has, to present the legal regulation of stock options in the legal system of the Czech Republic and Germany and to compare these legal regulations. The most common reasons for rewarding executives with stock options are the desire to align the interests of shareholders and executives, the desire to retain key members of the executive, the desire to reduce risk aversion on the part of the executive, advantageous tax regulation or the desire to maintain high cash flow. Rewarding with stock options can also be used as a tool for the natural selection of executives according to their attitude to risk, which rewarding with stock options provides. If the option agreement does not contain a sufficiently long vesting period, retention period, dividend protection and an exercise price linked to an appropriate market index, the granting of stock options, rather than aligning the interests of shareholders and executives, may lead to a fixation on short-term performance, undue risk- taking or exacerbation of the free cash...