This dissertation analyzes the effect of a stock market downturn on executive compensation plans which include stock option contracts. A model is developed to determine sufficient conditions for which the optimal compensation contract exhibits characteristics of a fixed salary plus stock option. If a publicly known shift in the distribution of firm value occurs after contracting and before the agent takes his action, then it can be shown to be in the principal's interest to renegotiate the agent's contract. The resulting contract is again a fixed salary plus stock options with lower exercise prices than in the original contract. It is assumed that the shift in the distribution of firm value is a low probability event that is not contracted upon. To determine whether or not it is optimal to contract on a low probability event the set of original contract and rengotiated contract is compared to a contract that is complete with respect to the event. Benefits to complete contracting exist if the agent commits to stay after information about the event becomes available. However, if the agent can leave at any time, the principal may prefer, initially, not to contract on low probability events and simply renegotiate the contract if a low probability event occurs. Renegotiation can take the form of lowering the exercise price of outstanding stock options or adding a layer of options with a lower exercise price than existing outstanding options. Nonparametric tests on stock option grants in 1985 through 1988 indicate that the size of grants in 1987 and 1988 is significantly larger than in 1985 and 1986. These results support the prediction that stock options outstanding in 1987 were renegotiated following the stock crash in October 1987. / Business, Sauder School of / Accounting, Division of / Graduate

This dissertation presents empirical evidence intended to help answer two research questions. The first question asks whether executive compensation systems appear to exploit the bias in accounting-based performance measures in order to reduce the volatility in executive compensation and to allocate incentives more effectively across the range of activities performed by the executive. The second question asks whether compensation systems systematically differ between firms that use alternative accounting methods and whether any such systematic difference helps explain accounting choice. Parameters estimated in fixed-effects endogenous switching regression models were used to test the risk-shielding and incentive-allocation hypotheses. The models were estimated across a dataset consisting of 1151 executive-year observations of annual compensation paid to 222 top-level executives in 40 oil and gas firms. The dataset was partitioned by accounting method and separate models estimated for the full cost and successful efforts partitions. The tests provided modest support for the risk-shielding and incentive-allocation hypotheses, revealing that accounting measurement bias is used to focus incentives for effort in the exploration activity and to reduce executives' exposure to production risk. The design also allowed an estimate of the proportional change in compensation that was realized from the accounting choice actually made.

This paper studies foreign currency adjustments in executive compensation (i.e. exclusionof foreign currency impacts from accounting-based performance metrics). In light of recent debates on the pros and cons of using non-GAAP adjustments in compensation, I propose a rational explanation for adjusting foreign currency concerning firm’s operating decisions. I employ real options theory to study foreign currency fluctuations in decision making. I show, both analytically and empirically, that Integration Level, the extent of coordinated activities or cross-border transactions between the parent and its foreign subsidiaries, can serve as an explanation. Firms with a high level of integration are less likely to adopt foreign currency adjustments. On average, firms consider foreign currency fluctuations to make corporate decisions; the usage of foreign currency adjustments in executive compensation is less likely to be a result of managerial opportunism.

Made available in DSpace on 2015-12-03T18:35:24Z (GMT). No. of bitstreams: 1 Juliano Augusto Orsi de Araujo.pdf: 1607194 bytes, checksum: 437af69b3f75d539344632263a506a52 (MD5) Previous issue date: 2012-11-12 / The executive compensation, recently, attracted the attention of investors and society, specifically the episode \"millionaires bonus\" paid to American executives who received massive amounts of money, even presenting results unprofitable companies that country. However, a problem indeed studied in the finance literature is that of information asymmetry and the relationship between agent and principal. Normative Instruction 480 issued by the CVM which, among other norms, determined the disclosure of remuneration fixed, variable and equity-based components of members of senior management, statutory committees, audit, risk, finance, compensation, beyond the board and tax has made possible the disclosure of empirical studies on executive compensation and performance of companies present in the Brazilian stock market. The distinction of persons, owner and manager of a business is a natural tendency of the global economy in view of the possibility of having highly skilled people at the helm of a company qualified for the tasks assigned to it. Thus arises the agency problem and the problem of this research: there is a relationship between executive compensation and performance of Brazilian companies? Thus, the overall goal of the research was to determine whether there is a relationship between compensation paid to executives of Brazilian companies and the performance of these companies. Specific also aimed to present the composition of executive remuneration in Brazil, check if the variable compensation influences the outcome of Brazilian companies, identify and describe characteristics of such companies which size and sector differences between the average pay per sector, descriptive statistics about the remuneration in Brazil, to investigate the relationship between executive compensation and performance of Brazilian companies and present the literature that addresses the relationship between executive compensation and performance companies. We used panel data with the observation of fixed effects and random effects. The study showed a statistically significant positive between executive compensation and performance of Brazilian companies. Concluded that there is increased executive compensation when there is increasing return to shareholders for the year, in the previous year and second last year / A remunera????o de executivos atraiu nos ??ltimos anos a aten????o da sociedade e de investidores, mais especificamente o epis??dio de \"b??nus milion??rios\" pagos a executivos norte americanos que receberam volumosas somas em dinheiro, mesmo apresentando resultados deficit??rios ??s companhias daquele pa??s. N??o obstante, um problema deveras estudado na literatura de finan??as ?? o da assimetria de informa????o e a rela????o entre o agente e o principal. A Instru????o Normativa 480 publicada pela Comiss??o de Valores Mobiliarios que, entre outras normatiza????es, determinou a divulga????o de remunera????es fixa, vari??vel e baseada em a????es de membros de componentes da alta diretoria, comit??s estatut??rio, de auditoria, de risco, financeiro, de remunera????o, al??m do conselho de administra????o e fiscal, tornou poss??vel a evidencia????o emp??rica dos estudos sobre remunera????o executiva e desempenho de companhias presentes no mercado acion??rio brasileiro. A distin????o das pessoas do propriet??rio e do gestor de um neg??cio ?? uma tend??ncia natural da economia globalizada tendo em vista a possibilidade de se ter pessoas altamente capacitadas no comando de uma companhia, qualificadas para as fun????es que lhe s??o atribu??das. Assim surge o problema de ag??ncia e o problema desta pesquisa: existe rela????o entre remunera????o de executivos e o desempenho de companhias abertas brasileiras? Deste modo, o objetivo geral da pesquisa foi o de verificar se a remunera????o paga aos executivos de companhias abertas brasileiras ?? influenciada pelo desempenho destas empresas. Teve por objetivos espec??ficos tamb??m, apresentar a composi????o da remunera????o executiva no Brasil, verificar se a remunera????o vari??vel influencia no resultado das companhias brasileiras, identificar e descrever caracter??sticas das empresas tais quais tamanho e setor diferen??as entre a remunera????o m??dia por setor, estat??stica descritiva acerca da remunera????o no Brasil, investigar a rela????o existente entre a remunera????o de executivos e o desempenho das companhias abertas brasileiras e apresentar a literatura existente que aborde a rela????o entre remunera????o executiva e desempenho de companhias. Foram utilizadas dados em painel com a observa????o de efeitos fixos e efeitos aleat??rios. A pesquisa apresentou rela????o estatisticamente positiva e significativa entre a remunera????o executiva e desempenho de companhias abertas brasileiras. Concluiu que h?? aumento da remunera????o executiva quando h?? aumento do retorno para o acionista no exerc??cio, no exerc??cio imediatamente anterior e no segundo exerc??cio anterior

Thesis (MBA)--University of Stellenbosch, 2011. / AFRIKAANSE OPSOMMING: Reeds vir dekades, maar spesifiek sedert vlaag op vlaag van groot korporatiewe skandale die laaste anderhalf dekade hoofnuus is, is die vergoeding van uitvoerende hoofde onder die vergrootglas. Die persepsie by baie aandeelhouers en die breë publiek is dat uitvoerende hoofde ruim vergoed word en dat hul vergoeding nie noodwendig verband hou met prestasie van die maatskappye wat hulle lei nie. Van die algemene kritiek wat voor die deur van maatskappye en uitvoerende hoofde gelê word, is dat salarisse en ander vorms van vergoeding, spesifiek aandeletoekennings en -opsies, nie deursigtig is nie. Daar is ook kritiek dat die vergoedingskomitees van maatskappye deur ’n botsing van belange geteister word, want juis die hoofde wat voordeel uit vergoedingsbeleide van die komitees kry, is verantwoordelik vir voorstelle rakende die vlakke van vergoeding wat betaal moet word. Daar word ook genoem dat hoewel Suid-Afrika een van die wêreldleiers is rakende gesonde korporatiewe bestuur, juis met die aanvaarding van die beginsels wat uiteengesit word in die King I-, II- en III-verslae, is daar steeds verskeie maatskappye wat nie aan die beginsels gehoor gee nie. In ‘n Amerikaanse studie rondom die eeuwisseling is bevind dat, in ‘n sakemodel waarin bestuursmag oorheers, lede van die direksie en die vergoedingskomitee geneig is om hul mededirekteure en bestuurshoofde te begunstig. (Crotty & Bonorchis, 2006). Die navorsingsverslag het ten doel om te bepaal of die totale vergoeding van uitvoerende hoofde van die 120 top-maatskappye van die Johannesburgse Aandelebeurs, wat bepaal is op grond van die 120 maatskappye wat aan die einde van 2009 die grootste markkapitalisasie gehad het, geregverdig kan word op grond van die individuele maatskappye se markvertoning. ’n Korrelasie tussen die totale vergoeding, wat alle kontant- en aandele-vergoeding insluit, is dus in verband gebring met die volgende drie veranderlikes: Omset, Totale Inkomste en EBIT-winssyfers. Dit is beduidend dat in meer as 80 persent van alle korrelasie-waarnemings van vergoeding teenoor al drie veranderlikes was daar ’n baie sterk positiewe korrelasie, wat beteken dat vergoeding van uitvoerende hoofde net toeneem indien daar ook ’n toename in die omset, inkomste en wins van individuele maatskappye is. Die navorsingsverslag het ook uitgewys watter vyf maatskappye onder die 120 topmaatskappye wat in Suid-Afrika genoteer is wel ’n negatiewe korrelasie wys, wat aandui dat daar nie ’n sterk korrelasie is tussen wat uitvoerende hoofde kan verdien en wat die vertoning van die maatskappy se omset-, inkomste- en winssyfers is nie. Wat insiggewend van die korrelasies is, is dat die minimum tydperk oor vyf jaar geskied het, wat dit statisties meer beduidend maak. Vergoeding word dus nie net eenmalig oor ’n kort tydperk ontleed nie, maar ’n langer termyn tendens van vergoeding by individuele maatskappy is waargeneem. Die gepubliseerde omset-, inkomste- en winssyfers vir die 120 maatskappye is uit die jaarverslae nagevors en die totale uitvoerende vergoeding, soos aangeteken op McGregor BFA (2009a) se databasis, is as data by die navorsingsverslag ingesluit. Die syfers van alle veranderlikes moes eers in Suid-Afrikaanse rand omgeskakel word, want verskeie maatskappye met dubbelnoterings op byvoorbeeld die Johannesburgse Aandelebeurs en die Londense of Australiese beurs se jaarverslae is in Amerikaanse dollar, Britse pond of Australiese dollar gekwoteer. Nadat die Spearman-korrelasie van elke individuele maatskappy bepaal is vir maatskappye wat syfers vir langer as vyf jaar beskikbaar het, is bepaal hoeveel waarnemings vir omset, inkomste en wins beduidende statistiese korrelasies toon, met ’n algehele waarnemingssyfer van meer as 80 persent van die maatskappye wat postiewe korrelasies gewys het vir die vlak van vergoeding in vergelyking met die drie ander veranderlikes. Daar is dus ’n statisties beduidende positiewe korrelasie tussen die vergoeding van uitvoerende hoofde van JSE-genoteerde maatskappye in vergelyking met die omset, inkomste en wins van die maatskappye. / ENGLISH ABSTRACT: For decades, but specifically since wave upon wave of corporate scandals made headline news in the past decade and a half, the remuneration of chief executives has been in the spotlight. The perception among many shareholders and the general public is that executives are very well paid and that their earnings do not necessarily relate to the performance of their companies. One of the most common criticisms against companies and their chief executives is that salaries and other forms of remuneration, especially share transfers and options, are not transparent. There is also wide criticism that remuneration committees of companies are plagued by a conflict of interests, as precisely the executives who stand to gain from the recommendations of these committees are responsible for the proposed levels of earnings. Furthermore, it is suggested that, although South Africa is regarded as a world leader in sound corporate governance, especially since the acceptance of the principles advanced in the King I, II and III reports, there are still a substantial number of companies that do not adhere tot these principles. This research project set out to establish whether the total remuneration of chief executives of the top 120 companies on the Johannesburg Stock Exchange, determined as the 120 with the largest market capitalisation at the end of 2009, could be justified on the strength of the individual companies’ market performance. Thus a correlation between the total earnings, including all cash and share awards, was brought in relation with the following three variables: Turnover, Total Income and EBIT Profit Margins. It is significant that in more than 80 persent of all correlation observations of remuneration, measured against all three variables, a very strong positive correlation came to the fore. This means that remuneration of executives only increase when there is a concomitant increase in the turnover, income and profit of individual companies. The research also pointed out which five among the 120 top companies trading on the JSE demonstrated a negative correlation, which shows that there is a strong correlation between the earnings of chief executives and their companies’ turnover, income and profit figures. Especially instructive is that a minimum period of five years was analysed, which makes it statistically more significant. Thus earnings were not adjudged once-off over a short period, but observed as a long-term tendency of remuneration by individual companies. The turnover, income and profit figures of the 120 companies were researched in the published annual reports of the data base of McGregor BFA (2009b), and the total executive earnings, as recorded in McGregor BFA’s Directors’ Search data base, were included as data in the research report. The figures of all variables were converted to South African rands, as several companies who are quoted both on the JSE or the London or Australian stock exchanges publish their annual reports either in US dollars, pounds sterling or Australian dollars. After the statistical technique of Spearman’s correlation was established for each individual company with data available for five years or longer, it was concluded how many observations of companies’ turnover, income and profit figures showed significant correlations. In total more than 80 persent of all observations of all variables of the companies had positive correlations, which suggests that the executive earnings of the vast majority of companies on the JSE demonstrates a strong correlation with their financial achievements.

Thesis (MBA)--Stellenbosch University, 2014. / ENGLISH ABSTRACT: Executive remuneration in South Africa has continued to attract public outrage and generate much debate among various stakeholders due to the perceived non-alignment of compensation packages awarded to senior executives and company performance. This research examines the relationship between executive compensation and financial performance of South African listed companies. Furthermore, the study investigates the link between executive pay and sustainability performance measures such as environmental, social and governance (ESG) criteria. Almost no research has been done in South Africa to examine the link and integration of ESG performance metrics into executive pay as researchers continue to focus on traditional financial measures of performance such as earnings (EBITDA), earnings per share (EPS), return on equity (ROE), return on assets (ROA), total shareholder return (TSR) and share price. The link between executive compensation and sustainability metrics (ESG) has become a topic of much discussion among academics and investors due to the potential influence of ESG factors on companies’ financial performance and sustainable long-term value creation. The research begins by examining the changes in the level of executive compensation during a five-year period and by testing the relationship between executive pay and traditional financial performance measures. The results show that the total compensation of CEOs has been steadily increasing during the five-year period while variable performance bonuses experienced a slight decline during the economic recession of 2007 to 2008. The results provided evidence that there is a statistically significant positive relationship between executive remuneration and company profitability. Findings for the second objective suggest that while executive compensation plans of many companies have been formally tied to ESG performance metrics, few companies in the study have disclosed effective and robust ESG performance measurement systems that tie executive pay to sustainability performance.

No description available.

Skills shortages in South Africa occur when demand for certain skills exceeds supply, South Africa has a high demand for mathematical, sciences and information technology (IT) related skills (Daniels, 2007:1). Factors such as HIV/AIDS, legislation (for example affirmative action), and rapid growth of the IT sector and the education system are contributing to the continuous increase in the skills shortages rate in South Africa (Daniels, 2007:1). As a result of the skills shortages, South African organisations find themselves competing with international organisations for managerial-level employees, resulting in a ‘war for talent’. This study specifically focussed on the incidence and reasons associated with managerial-level employees’ intentions to leave their KwaZulu-Natal (KZN)-based organisations. In particular, the perceptions of MBA students studying at UKZN formed the focus of this study. The study, both primary and secondary data were collected and analysed. In the study the targeted population were managerial-level employees who were currently working in KwaZulu-Natal-based organisations and who had met the entry requirements of UKZN’s Graduate School of Business (GSB). The purposive sampling technique was used and all the registered MBA students at the GSB of UKZN formed the target population that is, the target population comprised of all 1st year, 2nd year and 3rd year MBA students and there were approached following that same order. In the study it was found that the three CFST sub-components that had the most influence on the managerial-level employees’ decision to leave were aspects of the CFST related to careerpath strategies, management/leadership style and rewards. These results were more clearly supported and given stronger evidence by the rankings of the high scoring samples of the intention to leave (ITL) scale and propensity to leave (PTL) scale which depicted the same three CFST sub-components. Recommendations were made based on the findings of the study that South African organisations have a strong influence on the respondent’s decisions to leave their organisations. It was also recommended that South African organisations should implement effective leadership/management style and should also offer their managerial-level employees competitive remuneration packages. / Thesis (M.Comm.) - University of KwaZulu-Natal, Pietermaritzburg, 2009.

In the last decade South Africa saw the introduction of s 8C into the Income Tax Act, no.58 of 1962, the introduction of IFRS 2 into the International Financial Reporting Standards and the promulgation of the 2008 Companies Act. Each of these changes is relevant to and impact on the consequences flowing from executive share incentive schemes, from the perspective of both the employer company offering the scheme and the employee participating in the scheme. The aim of this study was to analyse, from the employer company’s perspective, the implications of each discipline in isolation, as well as the interrelationship of the three disciplines. The further aims of this study were to utilise the findings from the analyses to identify where legislative amendment is required to close loopholes or ensure equitable results, to identify where the interrelationship of the three disciplines result in unintended consequences, and to provide recommendations on how to avoid these adverse consequences. The most significant findings of this study are summarised below. Due to the legal precedent created by the Supreme Court of Appeal in the Labat case, the mode of settlement – cash or equity – will be the determining factor as regards the availability of an income tax deduction in the hands of the employer company. It is submitted that legislative amendment is required to rectify this inequitable result. Where payment by the employer pursuant to a share appreciation rights scheme occurs in a year of assessment subsequent to the year of assessment in which vesting occurred, changes in the value of the underlying equity instrument from the vesting date to the payment date could result in adverse income tax consequences to the employer and/or the fiscus. To address this, it is recommended that the Income Tax Act should be amended to expressly bring cash-settled executive share incentive schemes within the scope of s 7B and to align the provisions of s 7B and 8C in order to avoid anomalies existing between these two sections in so far as the income tax consequences in the hands of the participating employees are concerned.

published_or_final_version / Public Administration / Master / Master of Public Administration