Level Of Executive Compensation Research Articles

How do executive excess compensation affect enterprise technological innovation: Evidence from a panel threshold model of chinese biopharmaceutical companies

This study examines the levels of executive excess compensation (EEC) that stimulate the quality and efficiency of enterprise technology innovation (ETI). Using a behavioral agency perspective, we investigate how companies achieve superior ETI by providing sufficient incentives to motivate executives to perform to the best of their abilities. We use a panel threshold model based on a sample of Chinese-listed biopharmaceutical companies and find that: (1) providing an EEC between 0.0592 and 0.1907 significantly affects the promotion of ETI quality; (2) regarding ETI efficiency, executives generally do not receive the compensation that they deserve; and (3) the existing EEC has a weak negative impact on ETI efficiency, gradually disappearing as compensation increases. Heterogeneity analysis reveals that restricting EEC to the eastern area and strengthening the supervision of EEC in state-owned enterprises are effective measures for stimulating ETI. We advance the literature by providing guidance on compensation plans to companies in different regions.

Enterprise innovation, internal income gap and common wealth

This paper utilizes the data of China's A-share listed companies from 2008 to 2022 to explore the impact of innovation on the common wealth in depth from the micro-enterprise level. The study results show that improving enterprise innovation level has a positive promotion effect on the common wealth. However, this promotion effect varies across different types of enterprises and is particularly significant in reducing the income gap within state-owned enterprises. In addition, corporate innovation further contributes to common wealth by raising the level of employee compensation and lowering the level of executive compensation. This finding provides useful insights for policymakers.

An Analysis of the Impact of Insider Trading on Executive Compensation in Listed Companies Based on VAR Modeling

Abstract In this paper, we first establish a VAR model, screen the variables using the CSIS method so as to achieve fast dimensionality reduction, and use the cointegration theory to model non-stationary time variables to determine the pseudo-regression analysis between variables. Impulse response functions and variance decomposition are then used to analyze the dynamic effects of changes in random disturbance terms on the whole system and other variables. Finally, the effects of insider trading on executive compensation are explored using corporate performance and market-based executive pay entitlement as references, respectively. The results show that the regression coefficients of executive compensation level and cumulative excess turnover rate of the event announcement period are 0.805 and 0.018 for corporate performance and market-based compensation, respectively, and the higher the level of executive compensation based on corporate performance and market-based compensation, the lower the impact of insider trading on executive compensation. Equity incentives reduce the impact of insider trading on executive compensation, and the regression coefficient of excess turnover on executive compensation is less than 0 in firms with shareholding levels higher than 10%.

The effects of local newspaper closures on nonprofits’ executive compensation

We examine the role of local newspapers in monitoring the nonprofit sector by testing how local newspaper closures affect nonprofits’ executive compensation levels. Although prior research establishes that local newspaper closures affect behavior of for-profits and municipalities, the unique governance and enforcement environment of nonprofits make it unclear whether and how closures of local newspapers will affect nonprofits’ executive compensation spending behavior. Consistent with local newspapers serving as an alternative monitoring mechanism within the nonprofit sector, we find that, following local newspaper closures, the levels of nonprofits’ executive compensation spending increases. This effect is less pronounced among nonprofits having audits and among those with better internal governance. Our results suggest that newspaper closures exacerbate agency problems among nonprofits particularly when alternative monitoring mechanisms of nonprofits are weaker.

The Nonlinear Effect of Executive Compensation on Financial Performance

The agency theory propagates the use of compensation as a motivational measure to get the interest of the firm’s owners and the managers aligned. However, after a series of scandals, there has been a widespread focus on the payments made to the executives and their relationship with the organization’s financial performance. Although the relationship between compensation and performance has been observed extensively, the change in the relationship at various levels of compensation and the nonlinear aspect in the relationship still remain unanswered. Under this backdrop, the study makes an in-depth analysis of the relationship between executive compensation and firm performance in the context of 182 nonfinancial NSE-listed companies of India for the period 2014–2020. The study besides applying the static panel data analysis also advances to generalized method of moments based dynamic panel model to overcome the issues of endogeneity and declares that the relationship existing between executive compensation and firm’s Tobin’s Q is seen to be an inverted U-shaped curve. As per the robust estimator, an increase in the level of executive compensation is found to affect financial performance positively until it transcends a threshold level of 2.6% of the firm’s net profit.

The nonlinear effect of executive compensation on corporate social responsibility performance

PurposeTaking cues from the fact that there remains a dearth in the establishment of theoretical and empirical relationship between executive compensation and corporate social responsibility (CSR) performance of the firms, this study attempts to explore the non-linear relationship between the said variables.Design/methodology/approachThe study utilizes a strongly balanced panel data set of 179 non-financial National Stock Exchange (NSE) 500 listed firms for the study period of 2015–2020. The study further employs both static as well as Arellano-Bond dynamic panel model under generalized method of moments (GMM) framework to establish the relationship between executive compensation and CSR performance of the sampled firms.FindingsThe study acknowledges an inverted U-shaped relationship between executive compensation and environmental, social and governance (ESG) score of the firms. According to the robust estimator, an increase in the level of executive compensation is said to affect CSR performance positively until it surpasses a threshold level of 18.7 percent.Practical implicationsOne of the major takeaways that the study provides for the corporate policymakers is that the level of compensation can only motivate the executives to take up socially responsible work up to a certain level surpassing which the executives becomes resistant towards any benefits provided by the CSR performance and get inclined towards economical performances of the firm. At the later stage, the economical expansionary investment benefits overweigh the personal career benefit gained by the executives from the CSR performances of the firm.Originality/valueThe nonlinearity relationship between executive compensation and CSR performance and the threshold level providing the two-fold effect of compensation on the CSR performance of the firms attempted by this study is a rare attempt in an emerging economy like India.

The Effect of Intellectual Capital and Executive Compensation on Financial Performance

This study aims to determine the effect of intellectual capital and executive compensation on financial performance in Basic Materials Sector Companies listed on the IDX based on financial statement data for 201 8-2021. The data was tested using the panel data regression method. The population used is Basic Materials Sector companies listed on the Indonesia Stock Exchange (IDX) during 2018-2021. This study used purposive sampling method and obtained 35 companies during 4 years of observation. The results of this study show that intellectual capital as measured by VAIC has a positive and significant effect on financial performance and partial executive compensation also affects financial performance. Companies in the basic materials sector are expected to provide internal evaluations to maximize the management of intellectual capital owned and the efficiency of using company assets to improve financial performance in order to be able to foster competition in companies in the basic materials sector. Issuers should also take into account the level of executive compensation for key management in order to advance the financial performance of an issuer by (agent).

ESG performance measures for executive pay: Delphi inquiry strategy and experts’ opinion

Orientation: Rising levels of executive compensation amidst the widening inequality, unemployment, poverty and other socio-economic challenges have raised questions among policymakers, academics and practitioners alike on the best ways to resolve this conundrum.Research purpose: The main objective of this study was to identify a composite mix of environmental, social and governance (ESG) indicators that can be used in executive compensation plans.Motivation for the study: Whereas the importance of incorporating the ESG in executive compensation plans is well documented, it is not known which indicators are appropriate and can be used in the South African context.Research design, approach and method: A sequential exploratory research design was used in this study. The ESG-based indicators were identified from the literature and then subjected to three rounds of surveys in a Delphi enquiry strategy.Main findings: An eclectic mix of nonfinancial performance measures (NFPMs) based on the ESG philosophy were identified, confirmed and validated by a diverse team of international experts.Practical/managerial implications: In order to curb rising executive compensation and to disincentivise short-termism associated with sole reliance on profits as the only yardstick for performance, NFPMs identified in this study should be integrated into the executive compensation designs.Contribution/value-add: On an empirical front, the study proffers novel NFPMs for executive compensation plans that are predicated on ESG philosophy. The methodological contribution lies in the use of a Delphi inquiry strategy, which has never been used in the area of executive compensation.

Internal Compensation Gap and Firm Performance With the Mediating Effect of Compensation Level

The study aimed to investigate (1) the influence of internal compensation gap on firm performance (FP) and (2) the mediation effect of executive compensation level on the relationship between internal compensation gap and FP of listed energy companies in China. The sample was sourced from all upstream companies in energy industry on the Shanghai and Shenzhen stock markets. The data were collected from the companies' annual reports from 2015 to 2020. Descriptive analysis, correlation matrix, and unbalanced panel data analysis were used to analyze the data. The results show that internal compensation gap has a positive influence on FP and compensation level has a mediating effect on such influence. This study provides insight into the determination of compensation for companies to incentivize executives to demonstrate their abilities for the organization's advantage. Additionally, the findings demonstrate that tournament theory and agency theory can explain how compensation gap and level affect FP.

Compensation Benchmarking, Compensation Convergence, and Executive Mobility: An Empirical Analysis

Compensation benchmarking has become a common practice for determining executive compensation in companies. The key motive for compensation benchmarking is to identify an appropriate way of compensating executives, with the primary goal of human capital retention. In this study, we argue that compensation benchmarking leads to convergence in executive compensation by directing attention and informational cues following two mechanisms: a) direct peer influence through the selection of compensation peers, and b) indirect peer influence through exposure to the same compensation peers. Using an extensive panel of executive compensation data of publicly traded U.S. companies we show that compensation benchmarking leads to convergence in executive compensation levels and mix and in turn reduces the likelihood of executive mobility to peer companies. We discuss theoretical and practical implications.

CSR Performance, Executive Compensation Incentive and Innovation Investment of Chinese Private Enterprises under Dynamic Perspective

Based on social exchange theory, signal transmission theory and enterprise life cycle theory, this paper empirically analyzes the impact of CSR performance on enterprise innovation investment by taking the A-shares listed private enterprises in Shanghai and Shenzhen stock markets from 2009 to 2019 as research samples. At the same time, we pay attention to the moderating effect of executive compensation incentive, explore the dynamics of the influence mechanism in different life stages. The results show that: there is a significant positive correlation between CSR performance and enterprise innovation investment, that is, CSR behavior is conducive to the improvement of enterprise innovation investment intensity; Executive compensation incentive has a negative moderating effect on this relationship. The higher the incentive level of executive compensation, the weaker the positive impact of CSR performance on innovation investment. Further research shows that CSR performance affects innovation investment through the exchange of government resources and the promotion of market position, but the effects are different during the enterprise life cycle. Relevant conclusions enrich the theory and practice of CSR performance and enterprise innovation investment from the dynamic perspective, provide a theoretical basis for private enterprises to develop a reasonable and effective executive compensation incentive system.

AN EMPIRICAL STUDY ON THE MOTIVATION OF CHOOSING FAIR VALUE MEASUREMENT MODEL IN INVESTMENT PROPERTY

This paper selects all non-ST listed companies in the A-share market with investment properties in the time period from 2015 to 2019 as the initial research sample and employs a binary logistic regression model to empirically examine the specific motivations of companies’ management in choosing the fair value measurement model. Our results show that the level of enterprise fair value measurement has a significant positive impact on the increase in net profit, the improvement in the ability of debt financing, the increase in total assets, the increase in the level of executive compensation and the increase in enterprise value. However, it also enhances the level of enterprise earnings management and leads to an increase in speculations by enterprise executives. In the meantime, the higher the level of fair value measurement of investment properties, the greater the fluctuations in profit, total assets and debt financing. This indicates that the adoption of the fair value measurement model for investment properties will increase the instability of profit, total assets and debt financing of enterprises. The majority of enterprises currently adopt the fair value measurement model in relation to the listed investment properties for opportunistic motives, as a way of presenting an improved quality of enterprises’ financial disclosure to both outside investors and the market overall, while catering for market developments and external regulation.

A Literature Review on the Dual Effect of Corporate Tax Planning and Managerial Power on Executive Compensation Structure*

ABSTRACTIn this study, we review the extant literature on factors affecting the level and structure of executive compensation, with a specific focus on the power dynamic between firms and their executives. In doing so, we explore the competing effects of corporate tax planning and managerial power on executive compensation structure. We consider the theoretical underpinnings and related empirical findings regarding executive compensation structure and propose new avenues for future research that may deepen our understanding of factors influencing executive compensation structure.

International differences in the CEO gender pay gap

AbstractResearch question/issueThis study examines (i) whether and to what extent differences in the level of compensation paid to men and women can be observed at the corporate executive (i.e., CEOs) level in an international setting and (ii) whether and how country‐level attitudes toward gender equality help explain the heterogeneity in the CEO gender pay gap observed across countries.Research findings/insightsUsing executive compensation data from 27 countries over the 2001–2016 period, this study documents a 3.3% average difference in the level of executive compensation between male and female CEOs in countries around the world. The results further indicate that firms that transition from a male to a female CEO tend to have a significantly lower level of compensation. These results are robust when controlling for an array of key CEO attributes including education, age, and work experience and when US firms are excluded from the sample. Our findings also suggest that attitudes related to gender equality across countries can be an important factor explaining the CEO gender pay gap observed in our study.Theoretical/academic implicationsThe results of our study suggest the existence of a CEO gender pay gap at the international level. Specifically, our study suggests that the difference in pay between men and women, which is well documented in the literature of many countries, not only applies to regular employees in an economy but can also be generalized to those who work at the chief executive level. More importantly, our study suggests that a country's institutional environment vis‐à‐vis gender equality can contribute to the gender pay differences observed in various countries around the world.Practitioner/policy implicationsWe provide evidence supporting the existence of a gender pay gap using executive compensation data at the CEO level. We further show that country‐level institutional characteristics related to gender equality partly contribute to gender pay differences between male and female CEOs across countries. Thus, the findings of our study provide new insights into the potential determinants of executive compensation (i.e., CEO gender and country‐level gender equality) and are valuable to policymakers in proposing legislative changes to reduce the gender pay gap.

Effect of SME’s Managerial Ability and Executive Compensation on Firm Value

This paper analyzes the impact of the managerial ability and level of compensation on firm value in small and medium enterprises. The ability of managers is important for the sustainability and growth of small and medium enterprises because they lack awareness of resources, technology, and reputation compared to large enterprises. The managerial ability is the ability to efficiently utilize resources and choose the investment plan with the highest future net cash flows. Managerial ability is also an indicator of the level of compensation for executives. Therefore, the level of executive compensation can help a firm value or growth if it is based on managerial abilities. In addition, high executive compensation standards can be an opportunity or motivation to work hard for the wealth of companies and shareholders. We analyzed 1872 small and medium-sized companies listed on the Korean stock market to achieve the purpose of the research. We analyzed the accounting period of 6 years from 2012 to 2017. Our results have had a positive impact on firm value with executive compensation. In groups with excellent managerial skills, executive compensation has had a positive (+) impact on firm value. However, executive compensation did not have a significant impact on firm value in groups with poor managerial skills. These results validate that the CEO’s role in small and medium enterprise is important and that the level of compensation for executives is important to motivate. It also suggests that executive compensation cannot affect the firm value in groups with low managerial abilities.

The determinants of CEO compensation: new insights from United States

PurposeThe purpose of this paper is to examine the determinants of CEO compensation for sample of the US firms. It emphasizes the presence of executive compensation persistence and the importance of CEO power besides performance while setting CEO pay.Design/methodology/approachThe empirical analysis is conducted on a large sample of US firms during the period 2006–2016. It is based on the generalized method of moments (GMM) models to assess the impact of numerous factors on CEO compensation.FindingsThe main findings reveal that firm performance proxied by accounting-based proxies, as well as market-based proxies, plays a significant role in explaining variations in levels of executive compensation. Moreover, there is a significant persistence in executive compensation among the US sample firms. The authors also document that poor governance conditions (managerial power hypothesis) lead to high compensation levels offered to CEO.Research limitations/implicationsAt the end, without a doubt, the analysis has some limitations that prompt the authors to consider future research directions. One future research avenue that can help better explain the effect of firm performance on the CEO compensation is to study this issue using an international sample to determine whether country-level characteristics (e.g. creditor rights, shareholder rights and the enforcement climate) can influence this relationship. Furthermore, it can be worthwhile to deepen the analysis of CEO power and its impact on CEO compensation. It will be interesting to emphasize how the CEO power interacts with the other governance characteristics and some CEO attributes as CEO gender.Practical implicationsThe paper's findings have implications for practitioners, policymakers and regulatory authorities. First, the findings inform regulators that performance is not the only determinant of CEO pay level. This may warrant increased firm disclosure of the details of the pay structure. Second, the study offers insights to policymakers and members of boards of directors interested in enhancing the design of executive compensation and internal corporate governance, to better align managerial incentives to shareholder interests. Firms should strengthen the board independence and properly constitute the board committees (compensation, risk, nomination…).Originality/valueThis paper presents a comprehensive overview of the CEO compensation determinants. It supplements the classic pay-for-performance sensitivity predictions with insights gained from the dynamics of wage setting theory and managerial power theory. The authors develop a composite index to measure the CEO power in order to test the impact of CEO attributes on CEO pay. Additionally, it verifies whether the determinants of CEO pay depend on firm age and size.

Pay Dispersion among Non-CEO Executives and Agency Efficiency in State-owned Enterprises

The differential compensation distribution of executives is an important direction of deepening the reform of state-owned enterprises (SOEs). The compensation of SOEs is mainly decided by SASAC according to the unified compensation management method, and tends to adopt the equalitarian compensation distribution mode, leading to the generally low pay dispersion among non-CEO executives in SOEs, which greatly frustrates the work enthusiasm of the executives in SOEs, and often leads to more serious executive agency problems. However, there are few studies on the difference of compensation incentives in the top management team, which mainly focus on the vertical compensation gap between CEO and non-CEO executives, and the research on the internal compensation allocation of non-CEO executives is relatively scarce.Using the compensation data of all the non-CEO executives in listed SOEs from 2005 to 2017, this paper studies whether the pay dispersion among non-CEO executives has a positive governance effect in reducing the executive agency costs of SOEs. We find that, the pay dispersion among non-CEO executives can effectively reduce the executive agency costs of SOEs, and the results are still robust after adopting the IVs and the differential compensation reform of SOEs in 2015 as the exogenous event to control the endogenous problem. Further, we document that reducing the supervision cost and improving the incentive efficiency of non-CEO executives are two potential mechanisms. Specifically, when there are more supervision costs and less incentives for non-CEO executives, the above positive governance effect are more salient.This paper offers empirical evidence for the positive governance effect of the pay dispersion among non-CEO executives in SOEs, and makes up for the deficiency of negative effects such as high turnover and poor corporate performance caused by the pay dispersion among non-CEO executives. This paper not only enriches the literature on the pay dispersion among non-CEO executives, but also extends the related literature on the executive agency costs of SOEs. In addition, this paper has certain policy reference value for further deepening the reform of SOEs and improving the differential compensation distribution system of executives in SOEs. The promulgation of Guiding Opinions on Deepening the Reform of SOEs in 2015 means that, in the context of a new round of comprehensively deepening the compensation reform of SOEs, the incentive mechanism of executives in SOEs should not be limited to the level of executive compensation, but should consider whether the compensation distribution within the top management team is reasonable. Increasing the pay dispersion among the top management team is not only an efficiency issue, but also a fair issue. The underlying economic logic is that the pay dispersion among the top management team is an institutional arrangement for SOEs to reduce the agency costs under the specific governance environment in China. Only by truly realizing differentiated incentives for the top management team, can the enthusiasm of executives in SOEs be effectively activated, the agency efficiency be improved, and the high-quality development of SOEs be realized.

Executive Compensation Level, Executive Characteristics and Quality of Internal Control

In the process of transformation of economic momentum, the digital transformation and upgrading of enterprises has become an inevitable trend. As an important human resource of enterprise operation and management, senior executives play an irreplaceable key role in the process of enterprise transformation and upgrading. therefores, A total of 2244 A-share listed companies in China from 2015 to 2019 are selected for panel data analysis to verify the influence of the level of executive compensation, characteristics of senior executives and quality of internal control. The results show that there is a correlation between the level of executive compensation and the quality of internal control, and the characteristics of senior executives have a partial moderating effect between the level of executive compensation and the quality of internal control, but this moderating effect is weak and may be negative.

The Courts and Executive Compensation in Canada

The rapid rise in the compensation of executives at large corporations has become an issue in many developed countries in recent years. The issue can be framed both as one concerning corporate stakeholders whose interests might not be well served by the trend, and as one concerning society as a whole owing to its relationship with a concurrent rise in income inequality generally. These have raised interest both in the role that institutions have played in shaping this trend and in what role they might play in dealing with it. This paper looks at the role played by one such institution, the courts, in Canada, a country which has seen both executive compensation and income inequality levels rise substantially since the 1980s. Previous literature on the role of courts in executive compensation disputes have focused almost exclusively on shareholder litigation using the derivative action in the United States. Drawing on a set of cases compiled by the author in which the courts of Canada’s common law provinces dealt with a dispute over the compensation of a corporate executive this paper makes two contributions to the literature from a Canadian perspective. The first is that it provides evidence that the courts have a much more complex role than merely being a forum that hears shareholder suits challenging pay. Executives themselves often turn to the courts seeking to enforce contractual claims to pay, and disputes also appear in bankruptcy/arrangement proceedings in which multiple stakeholder interests are in play. It also provides evidence that differences in legal mechanisms available across jurisdictions matter. In the Canadian context despite a significant volume of shareholder litigation none of it has used the derivative action so commonly referred to in the American literature. Rather such cases overwhelmingly proceed using Canadian corporate law’s oppression remedy, a significantly different mechanism that gives shareholder lawsuits a much different character. An over-riding feature with litigation generally however is that while most stakeholder groups – shareholders, executives and to a lesser extent creditors – regularly feature in disputes, corporate employees are one whose interests are not generally represented. The second contribution relates to the fact that previous studies have examined the role of the courts mainly from the perspective of the corporate law agency problem. This paper instead views it from the perspective of both the agency and inequality problems that executive pay currently poses. Taking into consideration the broader institutional setting it explores the argument that an expanded role for the courts might better allow for the balancing of these two concerns. In the Canadian context the paper raises an exploratory argument that this could be accomplished through expanding the scope of the oppression remedy mechanism to allow employees to bring claims against executive compensation.

Excessive CEO Compensation and Effort Contributions in the Non-Profit Sector

This study examines whether high executive compensation has adverse effects on volunteers' willingness to make labor contributions to nonprofit organizations. Using compensation information in IRS Form 990, we find that high CEO compensation negatively influences the number of future volunteers working for the nonprofit organization if executive compensation is considered to be excessively high, or if there is media attention regarding the CEO's compensation. These effects are most pronounced in smaller and more charitable organizations. Hence, our study presents previously undocumented implications of high executive compensation levels in the nonprofit sector.