Abstract
This study proposes a new approach to examining executive remuneration and manager characteristics disaggregated by market index peer clusters and analyses personal attributes that differentiate managers across companies of different market caps (proxied my market indices such as FTSE 100, FTSE 250, FTSE SmallCap, and AIM). Our sample is composed of biographical data on 790 executive directors from 125 UK financial firms covering a 2004-2016 time period. The results show that network and education are the most important factors for career progression. On average, FTSE 100 executive directors are three times better connected and two times better educated than FTSE SmallCap and AIM board members. The larger the firm, the more diverse the board with more international (non-British) and female directors (even though male executives mostly dominate). The higher position is associated with greater age, while new executives tend to be younger and better connected. We highlight a change in the new managers’ skill-set after the financial crisis which may presumably be explained by risk aversion. New directors appointed after 2008 are, on average, older and better educated. Even though after the crisis we document that all the boardrooms, except FTSE SmallCap, appear to have become more gender diverse, the female presence in the boards is scarce and the highest number of women was mainly employed during the financial crisis. After 2008, British boards have become less nationality diverse. Thus, for the purpose of maintaining companies’ competitive advantage in increasingly diverse markets, it requires further attention from policy regulators.
Highlights
The average remuneration of FTSE 100 chief executives is 160 times the average UK salary (Steiner, 2017)
Based on the evidence 1) that executive pay of top managers is benchmarked against peers and differentiate by firm market capitalisation, 2) that the determinants of board structure differ between small and large firms (Linck, Netter, & Yang, 2008) and 3) the evidence of a complementary relation between pay for top executive credentials and firm size (Falato & Milbourn, 2015), we claim that the difference in executive pay and the top paid manager characteristics should be clearly seen when analysed in respect to market index peer groups such as FTSE 100, FTSE 250, FTSE SmallCap and AIM firms
The findings of Shivdasani and Yermack (1999) indicate that the CEO‟s attempt to bias new board appointments in their favour. In addition to this empirical evidence, we examine in our paper whether the personal characteristics of the newly appointed executive directors are similar to the existing board or, the skill set of the new members is different
Summary
The average remuneration of FTSE 100 chief executives is 160 times the average UK salary (Steiner, 2017). This work adds to the previous literature on board characteristics and composition by analysing personal attributes that differentiate managers across companies of different market cap (proxied my market indices such as FTSE 100, FTSE 250, FTSE SmallCap, and AIM) It highlights managerial traits important for hiring decisions and provides insights on how the characteristics of executive directors change across different company hierarchies, and over time. This paper contributes to the discussions on what makes better boards (Ben‐Amar, Francoeur, Hafsi, & Labelle, 2013) and expands upon the previous literature on managerial traits, the quality of board governance and UK board composition (O‟Sullivan & Diacon, 2003; Dahya & McConnell, 2007; Malmendier, Tate, & Yan, 2011) It highlights executive characteristics important for hiring decisions and identifies personal attributes that differentiate the board of FTSE 100 from FTSE SmallCap and AIM market firms.
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