Chief executive officer compensation and tax risk

Most research of chief executive officer (CEO) compensation in the health care industry has been limited to hospitals. This study expands our knowledge of CEO compensation into the nonhospital areas of the industry, specifically community health centers (CHCs). CHCs are safety-net providers that are an integral part of the U.S. health delivery system for medically underserved populations. Since the passage of the Patient Protection and Affordable Care Act, the federal government has created financial incentives for CHCs to improve care through access and quality performance criteria. To promote quality improvement, CEOs need to set their organization's priorities. One method used to achieve this goal is to tie the CEO's compensation to the organization's quality performance. However, there is a gap in our knowledge if CHCs' CEOs compensation is associated with quality performance outcomes. The primary aim of this study was to examine the relationship between clinical performance and CEO compensation in CHCs. Agency, social comparison, and managerial power theories guided this research, which examines the relationship of clinical performance and CEO compensation. Secondary data on Uniform Data System's CHC clinical performance combined with CEO compensation from Internal Revenue Service Form 990 were analyzed using generalized estimating equations with state and year fixed effects on a national sample of section 330 grant-funded CHCs (N = 984) for the period 2011-2016. We found no evidence that clinical performance was associated with CHCs' CEO compensation. Except for race, all other CEO characteristics were positively associated with CEO compensation and in line with previous research. We found that non-White CEOs were compensated more than White CEOs. In addition, further subanalyses revealed that an increase in the highest paid employees' compensation was associated with an increase in CEO compensation. The findings of this study can assist Health Resources and Services Administration improve its assessment policies in funding allocation to CHCs, as well as help board members make informed decisions regarding tying CEO compensation to predetermined performance metrics.

Orientation: The level of chief executive officer (CEO) compensation and its relationship with organisational performance has generated considerable interest worldwide. In light of compromised mining productivity as a result of the recent labour unrest in South Africa, some commentators have questioned the justification of certain CEO compensation in the country’s mining industry.Research purpose: The primary purpose of this study was to describe the relationship between CEO compensation and organisational performance in the South African mining industry.Motivation for the study: A deeper understanding of the relationship would enhance knowledge when developing optimal CEO reward systems to ensure sustainability of the mining industry within the South African context.Research design, approach and method: The research was a quantitative, archival study involving 30 mining companies over a 5-year period. The statistical analysis techniques used in the study included analysis of normality variance and multivariate regression.Main findings: The main finding of the research was that there was a moderate to strong relationship between CEO compensation and organisational performance in the South African mining industry. However, operating expenses have progressively increased, putting performance under pressure. Furthermore, it was also found that organisation size plays an influential role in CEO compensation levels.Practical/managerial implications: While the CEO compensation appears to be generally aligned with the organisational performance, the findings suggest that boards of directors should focus on structuring reward systems more optimally to mitigate managerial rent seeking in large companies and unsustainability in smaller companies.Contribution/value-add: This study has contributed to the body of existing knowledge on executive pay for performance in the context of the South African mining industry. In addition, the study has demonstrated that the other measures related to non-performance need to be considered in executive compensation design. The study adds practical value in contributing to information for engagements with stakeholders such as organised labour on executive pay.

ABSTRACTThis 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 over the period 2005–2012, we find that both current- and previous-year accounting performances 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.

The motive behind conducting this study is to investigate the effect of the agency theory on Chief Executive Officer (CEO) Compensation through alignment among firm performance and CEO compensation. The moderating variables like Board characteristics (Board independence, Board gender diversification) and Audit quality have some connection between firm performance and CEOs compensation. The data for the period 2013 to 2017 is collected from 100 non-financial firms registered at the stock exchange of Pakistan. Empirical evidence show that firm performance is positively connected with CEO compensation which is close to the agency theory's pay-performance correlation plan. The results demonstrate that independent directors on board insignificantly affect the alignment among firm performance and CEO compensation in Pakistan. The Board gender diversity has an insignificant effect on the alignment among firm performance and CEO compensation. In contrast, audit quality positively affects the alignment among firm performance and CEO compensation. Since a higher quality audit gives the organization a realistic view. The control variable results also purported that financial leverage and firm age have no influence on the CEOs compensation but firm size has positive effect on CEOs compensation. This study contributes in future research on the Agency theory and pay related performance contribution.

The soaring compensation levels of chief executive officers (CEOs) have spurred an intense debate about its outcomes. This paper examines an understudied outcome in this regard: employee engagement. Using a dynamic panel model with data from 336 publicly listed firms across 26 countries, we find that employee engagement is generally unaffected by CEO (over)compensation. However, negative effects emerge under specific conditions. First, employee engagement declines with negative media coverage about CEO compensation. Second, employee engagement declines with greater CEO (over)compensation in the financial sector, which is a sector with extraordinary levels of CEO compensation and compensation controversies. The findings suggest that a ceiling effect exists, at which point negative effects emerge and employee engagement becomes relevant in determining CEO compensation policies, while the general insensitivity of employee engagement to CEO compensation can help explain the soaring CEO compensation levels.

This study examines how chief executive officer (CEO) compensation decisions may be influenced by a major group decision-making tendency referred to as group polarization among outside directors. I start by explaining why outside directors on average tend to support relatively high (low) CEO compensation when they previously witnessed relatively high (low) CEO compensation across different boards. Group polarization theory then suggests that when outside directors on average tend to support relatively high (low) CEO compensation prior to board discussions, they will support even higher (lower) focal CEO compensation after the discussions. In addition, this study proposes three important moderators of the group polarization effect. Specifically, (1) demographic homogeneity among outside directors and (2) the similarity of the minority’s prior decision context are proposed to weaken the group polarization effect, whereas (3) outside directors’ power relative to inside directors is predicted to strengthen it. Longitudinal analyses (1995–2006) of Fortune 500 CEOs’ compensation provide support for these theoretical predictions. This study contributes to corporate governance research on CEO compensation by advancing a novel group decision-making approach to examining this important decision.

Cash contributions to defined benefit pension (DB) plans reduce cash flows from operations without directly affecting the current year's net income. We utilize this unique setting to investigate how managerial incentives to report higher cash flows from operations, executive compensation in particular, affect contributions. Using a comprehensive dataset of DB plan contributions, we find that firms with higher chief executive officer (CEO) compensation contribute less to DB plans, consistent with managers benefiting from lower pension contributions. Results are stronger when CEO compensation is directly linked to cash flows from operations or when CEO compensation is more sensitive to cash flows from operations. We also find enhanced disclosure and more transparent reporting under the recent pension accounting regime mitigates the negative association between executive compensation and cash contributions.

PurposeThis paper aims to examine the relation between chief executive officers (CEOs) compensation and organizational performance in KSA listed companies. It also aims at investigating the effect of corporate governance mechanisms according to this relation.Design/methodology/approachThe researcher uses unbalanced panel data regression analysis on a sample of 181 KSA listed companies from 2005 to 2014.FindingsThe estimation result suggests that CEO Compensation is positively associated with firm performance. The results also show that corporate governance positively and significantly affect the relation between CEO Compensation and performance.Research limitations/implicationsThis research, like any other, has some limitations that can be addressed by future research. The important limitation of this research is that the generalizability of the results is limited by the fact that the majority of the firms in the sample are from material sector which is represented by 42 (32 per cent) firms versus pharmaceutical sector which is represented by only one (1 per cent) firm. Therefore, a future research can tackle the effect of CEO compensation, corporate governance on future firm performance independently.Practical implicationsThe findings have some important implications for stakeholders such as policymakers, listed firms managers, business owners and academic researchers in the emerging KSA market. Besides, understanding the relation between CEO compensation, corporate governance and firm performance can aid the success of corporate modernization and economic reform in KSA.Originality/valueThe research attempts to fill a substantial gap in the literature by providing the first rigorous econometrics evidence on CEO compensation, corporate governance and firm performance. In addition, it provides interesting insight for researches, decision-makers and board members in KSA.

The current study examines the effect of ownership structure (i.e., government ownership, family ownership, and foreign ownership) on chief executive officer (CEO) compensation in an emerging market, by considering Jordan as a case study. By using a sample of 136 non-financial firms listed on the Amman Stock Exchange over the period of 2015–2019, we find that family ownership has a positive and significant impact on CEO compensation. The finding regarding foreign ownership is contrary to expectations, with a higher foreign ownership reflecting a higher CEO compensation. Overall, these results imply that the ownership structure of Jordanian companies exerts a significant influence on the CEO pay setting process. However, government ownership has no relationship with CEO compensation. This indicates that government ownership is ineffective in determining CEO compensation. We further find that firm size is positively related to CEO compensation, indicating that larger companies have more ability to generate high internal funding, and can afford to pay higher compensation to quality managerial talent. In contrast, the effects of firm age and liquidity are not at significant levels.

This paper examines the gaps in chief executive officer (CEO) and worker compensation by exploring the vital data of 10 corporations as uncovered in a study by NerdWallet.com on the differences in hourly compensation between CEOs and average hourly workers or employees. The author examines the problem of excessive compensation for CEOs as a major organizational challenge that affects perceptions of fairness by stakeholders, especially employees or workers whose contributions to organizational performance and success are not being adequately rewarded, but instead transferred to CEOs and other executives as companies increase revenues and profits through the sweat and toil of ordinary workers. The author argues that executive compensation should be linked to organizational results and performance, and examines the standards and considerations for determining fair wage and compensation, and from examining vital data on CEO compensation and average worker compensation, explores the implications for organizational change, including consideration of quality work life (QWL) investments. Several recommendations are made for meeting the challenge of excessive CEO compensation to include the following: (1) developing new approaches or methods of compensation that take worker rewards into consideration; (2) limiting CEO or executive compensation relative to established multiple of the average worker’s wage; (3) intervention and petition from governmental and administrative agencies including workers’ rights organizations for change; and (4) more compassionate leadership and management by organizational CEO and executives with increased concern for workers’ well-being. Employee Retention, Employee Satisfaction, Excessive Compensation, Executive Compensation, Fair Wage, Organizational Citizenship Behavior (OCB), Quality Work Life (QWL), Stakeholders.

CEO excess compensation: The impact of firm size and managerial power

Drawing on agency theory, we explore the relationship between mergers and acquisitions (M&As) and chief executive officer (CEO) compensation in the hospitality and tourism (HT) industry. Specifically, we investigate whether growth via acquisitions, a popular strategy in the HT industry, is influenced by CEO compensation. Using a sample of HT and non-HT firms for comparison from 1992 to 2019, we find that CEO compensation is significantly higher after acquisitions for both HT and non-HT firms. However, when controlling for common compensation determinants, CEO compensation is significantly higher in HT firms but not in non-HT firms. Surprisingly, in our sample, corporate governance is not significantly related to changes in CEO compensation post-acquisition. In addition, while the fraction of cash-based compensation is negatively related to M&A propensity in both HT and non-HT firms, the fraction of equity-based compensation is unrelated to M&A propensity in HT firms. Our study fills an important gap in the sparse literature on the link between M&A and CEO compensation in the HT industry, providing theoretical implications for future research and managerial implications for boards of directors to design compensation plans that align the interests of managers and shareholders.

PurposeThe main purpose of this paper is to examine the relationships among chief executive officer (CEO) compensation, ownership and firm value. In addition, the determining factors of CEO compensation are examined.Design/methodology/approachThis model is applied to data of the Taiwan stock market for 1995‐2004. The paper applies a two‐stage least squares regression for the panel data model and implements an F‐test, LM test and Hausman test to determine the best statistical method (that is, ordinary least squares method, fix effects model or random effects method).FindingsThe results offer some important insights that show CEO compensation, CEO ownership and firm value are interdependent. Firm size, board size, firm value, institution ownership and CEO ownership are positively associated with CEO compensation while firm age, research and development expenditure rates and firm risk are negatively associated with CEO compensation.Practical implicationsThe on‐going expansion in the scale of the firm depends on managers having specialized knowledge. In particular, managers are responsible for the firm's entire operational conditions and future investment strategy. Providing an incentive compensation package can reduce agency costs between managers and shareholders. These findings also provide Taiwanese listed companies with a lesson, which suggests that the existence of the monitoring system can reduce the need for incentive alignment.Originality/valueThe study relies on data from publicly traded Taiwan firms, covering a ten‐year period. This study uses a simultaneous equation estimation procedure to investigate the relations among CEO compensation, CEO ownership and firm value. Two proxies for effective monitoring – board size and institutional ownership – are used. The paper attempts to discuss the influence on CEO compensation from the existence of the monitoring system.

The theory and research on chief executive officer (CEO) compensation tends to be dominated by assumptions and values reflective of those dominant in the national culture of the United States, where most of this work is done. This suggests that an underlying theme focuses on how CEO compensation is related to instrumental choices made in a competitive, capitalist culture. This study seeks to expand the understanding of CEO compensation by examining it in the context of other cultures, based on the premise that national culture plays a significant part in the nature of compensation strategies. We relate cultural dimensions (uncertainty avoidance, power distance, individualism, and masculinity-femininity) developed by Hofstede (Hofstede 1980a, 2001) to several dimensions of CEO compensation. These dimensions are total CEO pay, the proportion of variable pay to total compensation, and the ratio of CEO pay to the lowest level employees. The main findings of our paper are (1) all of the different dimensions of CEO pay were related to power distance, leading us to infer that CEO pay in a culture is most reflective of the strength of the power structure in a society, and (2) total compensation and the ratio of variable pay to total pay are related to individualism. We conclude that cultural dimensions can contribute to understanding cross-national CEO compensation. The implication of this conclusion is that there are different ways that CEO compensation fits into the cognitive schema of various cultures and, furthermore, that these cognitive schema vary across societies that affect the nature of the “cultural matrix into which [money] is incorporated” (Bloch and Parry 1989, p. 1). Moreover, our results imply that particular forms of CEO compensation do not mean the same thing in different cultures, but rather carry different symbolic connotations depending on the values dominant in a society. Thus, not only does the compensation structure of a firm within a culture have a symbolic meaning within organizations (e.g., Trice and Beyer 1993), but it can also be seen as an expression of deeper social values (Hofstede et al. 1990) that may differ across countries.

Contributors