Executive Pay Research Articles

Does Stakeholder Outrage Determine Executive Pay?

Abstract An unprecedented number of firms announced CEO salary reductions at the onset of the coronavirus pandemic. We document that the total compensation for these CEOs did not actually decrease but was instead restructured, leading to a marked increase in opaque components of compensation. These adjustments align with the managerial power view of executive pay setting, whereby heightened stakeholder outrage prompts greater camouflaging of compensation to avoid scrutiny. We further show that this pattern of compensation adjustments predominantly occurred in firms with powerful CEOs, weak institutional investor monitoring, and poorer governance quality.

Insider Trading before Earnings News: The Role of Executive Pay Disparity

We investigate how executive pay disparity affects insider profits around earnings news. Our findings reveal that high pay disparity is linked to higher abnormal returns from insider purchases before positive news, suggesting insiders exploit good news for greater gains. Conversely, it is associated with lower abnormal returns from insider sales before negative news, indicating less benefit from such sales. These insights highlight the influence of pay disparity on insider trading and underscore the importance of understanding this dynamic to improve decision-making and reduce misuse of insider information.

Executive Pay Disclosure Mandates and CEOs’ Qualification Signaling Through Firm Size Growth

Executive Pay Disclosure Mandates and CEOs’ Qualification Signaling Through Firm Size Growth

The effect of firm‐level economic policy uncertainty on labor share: Empirical evidence from China

AbstractIn the 21st century, various unexpected events such as the financial crisis and COVID‐19 have exacerbated the uncertainty of economic policies, whose influence, especially those at the firm level, on the labor share remains to be studied. This article constructs the firm‐level economic policy uncertainty (FEPU) through text analysis and empirically analyzes its impact on labor share. Empirical evidence suggests that FEPU can significantly decrease labor share, particularly among firms with financing constraints, low productivity, and high market shares. And the results hold up after a series of robustness tests. Moreover, mechanism analysis indicates that precautionary saving motives play a crucial role in driving firms’ reduction in labor share rather than capital substitution motives. Finally, we further find that although FEPU harms the labor share, it significantly reduces executive payment and has no significant effect on the payment of ordinary employees, thus reducing within‐firm inequality. This study enhances our comprehension of how economic policy uncertainty at the firm level affects firm behavior and provides theoretical and practical guidance for increasing labor share and employee welfare.

Religious Institutional Environment and Executive Pay Dispersion

AbstractThis study extends the extant literature on executive pay dispersion by exploring the cultural-cognitive social determinants. We investigate how religious institutional environments, including Buddhism- and Confucianism-based institutions, shape vertical executive pay dispersion. We theorize that a Buddhism-based institutional environment is negatively related to vertical executive pay dispersion. In contrast, we propose competing hypotheses regarding how a Confucianism-based institutional environment affects vertical executive pay dispersion. With a sample of Chinese public firms, we find that both Buddhism- and Confucianism-based institutional environments are negatively associated with a firm's vertical executive pay dispersion. Supplementary analyses show that the aforementioned main effects are attenuated when a firm is embedded by a communist party branch and has a younger CEO.

Stockholder Wealth Maximization during the Troubled Asset Relief Program Period: Is Executive Pay Harmful?

This study investigates governance mechanisms and their relation to firm value, i.e., executive compensation restrictions during the regulatory period and their effects on the performance of firms that received Troubled Asset Relief Program (TARP) funds. We employ an event study to investigate the market reactions for TARP recipients, followed by OLS regression to examine the stock return effects of 10 announcements. For comparison, we also employ a multivariate regression model (MVRM) based on a system of equations with seemingly unrelated regressions (SURs). Our evidence shows that changes in firm value have a negative and significant relationship with changes in total compensation for TARP companies that have paid back their debts to the government. However, the relationship is weaker than that for TARP companies that have not paid back the bailout money.

Beyond ESG: Executive Pay Metrics and Shareholder Support

Beyond ESG: Executive Pay Metrics and Shareholder Support

Why Academic Research Has Done Little to Solve the Problems of Executive Pay

Why Academic Research Has Done Little to Solve the Problems of Executive Pay

Can the Executive Pay Gap Promote High-Quality Corporate Development? —A Study of the Moderating Effect Based on Equity Concentration

Can the Executive Pay Gap Promote High-Quality Corporate Development? —A Study of the Moderating Effect Based on Equity Concentration

Do Big Inequalities in Executive Pay Hurt Firm Performance?

Do Big Inequalities in Executive Pay Hurt Firm Performance?

The Effect of Market Competition on Executive Pay Cap*

The Effect of Market Competition on Executive Pay Cap*

Integrating Corporate Governance Practices into New Financing Projects and Executive Pay Structures

Purpose: This study aims to explore the integration of corporate governance practices into new financing projects and executive pay structures, highlighting their impact on organizational performance, transparency, and stakeholder trust. It addresses the growing need for robust governance mechanisms to align executive incentives with long-term value creation and effective decision-making in financing projects. Research Design and Methodology: A quantitative descriptive research design was employed, utilizing survey instruments, statistical analysis, and regression modeling to examine the integration of governance practices across diverse corporations. The study focused on the prevalence, determinants, and outcomes of governance integration in financing projects and executive compensation structures. Findings and Discussion: The findings reveal that robust corporate governance mechanisms significantly influence firms' financing decisions and executive compensation structures. Effective governance practices enhance transparency, accountability, and risk management, leading to lower financing costs, greater investor confidence, and improved project outcomes. The study also highlights the role of performance-based executive compensation schemes in aligning executive incentives with shareholder interests, fostering long-term value creation. Implications: The research underscores the importance of integrating corporate governance practices into financing and compensation frameworks to enhance organizational performance and stakeholder trust. It offers practical insights for policymakers, practitioners, and scholars on developing governance mechanisms that ensure prudent decision-making and value optimization. The findings advocate for continuous improvement in governance practices to meet evolving regulatory, shareholder, and societal expectations.

Entrepreneurial Experience and Executive Pay

Entrepreneurial Experience and Executive Pay

Do Korean Pension Guidelines Improve Firms’ Management Efficiency?

This study examines whether Korean pension guidelines that limit the payment of director show practical policy effectiveness by improving corporate management efficiency. Specifically, this study examines stickiness of pay to determine whether opportunistic executive payment existed in firms where executive pay was above 50% of articles of incorporation, before the announcement of the Korean pension guidelines. Further, we examine how executive pay stickiness has changed after the implementation of Korean pension guidelines to check whether they have been effective in improving corporate management efficiency. We use data from 2011 to 2019 and determine that, prior to the announcement of Korean pension guidelines, firms who paid above 50% of articles of incorporation showed higher executive payment stickiness. This suggests that these firms had a more opportunistic payment structure. However, this stickiness disappears after the announcement of Korean pension guidelines in 2020, suggesting that the Korean pension guidelines for executive pay show policy effectiveness. However, in 2020, the majority of decision-making within firms was affected by the global pandemic; therefore, there exists a need for additional research using a sample unaffected by the impact of the pandemic.

Executive Pay and CSR: How Pay Components Influence Executive Attention towards CSR

Prior work has emphasized that top executives are a key predictor for the observed variance in firms’ corporate social performance (CSP). While much work has investigated the implications of specific pay components for corporate social responsibility (CSR) behavior of top executives, only little is known about the underlying process that explain how these relations occur and how they can be influenced. In particular, prior work has commonly assumed that executive pay influences firm CSP through executive attention. In order to integrate prior work and provide important evidence for the attention-effect of executive pay, the present study examines how pay components are related with executive attention. I test these predictions on a sample of large, publicly traded U.S. firms between 2007 and 2018. The findings suggest a significant relation between salary, short-term pay, long-term pay and CSR attention. The implementation of CSR performance goals is not statistically significantly related with CSR attention, however, this relation depends on the substance of the goal, the distinctiveness of the goal, and executive tenure. I discuss these findings and provide potentially promising avenues for future research.

Institutional Investors and Corporate Innovation: Executive Pay and Competition as Key Contingencies

Innovation financing is crucial to corporate technological development and national innovation construction, yet how does institutional investors affect corporate innovation behaviors, and the contingent impacts of executive remuneration and market competition on this relationship, are still unclear. In this paper, drawing from literature on institutional investors, corporate governance and innovation, we empirically study the impact of institutions on corporate innovation and the moderation effects of executive remuneration and product market competition by employing a multiple panel dataset. Results show that 1) there is an inverted U-shaped relation, instead of a linear one, between institutional shareholding and corporate R&D investment, and 2) executive remuneration and market competition can enhance this correlation. Additional analysis finds that 1) the curvilinear relation remains regarding on innovation performance, and furthermore 2) product market competition has a positive impact on sales costs and marketing activities. This study reveals the double-edged sword impact of institutional ownership on corporate R&D, facilitating in-depth understanding of the role of institutional investors in corporate strategic management. And it fills the gap between executive remuneration and market dynamics on institutions and innovation, providing meaningful practical evidence for relevant theory and fields. Practically, this paper suggests that the government should properly encourage institutions to participate in corporate governance and the reform of development pattern, and firms need to further perfect executive remuneration system and take full advantage of market competition and external dynamics to support technological innovation.

Executive Pay: Board Reciprocity Counts

AbstractWe study the influence of the corporate board network on executive pay for 3,395 US firms between 1990 and 2015. We identify three elementary structures through which the interlocking network reflects forms of inter-group reciprocity across firms:restricted exchange, when two executives sit on each other’s respective boards;delayed exchange, whenysits on the board ofxafter the end ofx’s mandate on the board ofy; andgeneralized exchange, whenxsits on the board ofy, who sits on the board ofz, who sits on the board ofx. These ties, which are overrepresented, are related to higher executive pay, but are not related to firm performance, which we interpret as a form of rent extraction. We use the Sarbanes-Oxley Act (2002) as a natural experiment to confirm our results. The impact on pay disappears after 2004, once these types of exchanges are constrained.

Does Stakeholder Outrage Determine Executive Pay?

Does Stakeholder Outrage Determine Executive Pay?

Executive Compensation, Executive Pay Gap and Firm Performance—Based on the Empirical Research of Listed Companies in China

As one of the important means of motivating employees, salary has a very important impact on the performance of enterprises, as the core managers of enterprises, the working attitude and enthusiasm are directly related to the survival and development of enterprises. Different companies have different treatment standards and salary mechanisms for the same position, and the treatment standards of each senior management in the company are obviously different. This paper uses all listed companies in China from 2015 to 2020 as a sample and conducts empirical research. Two models were established to analyze the impact of executive compensation and executive pay gap on company performance. After putting forward hypotheses, design variables, empirical analysis and robustness test, it is concluded that the executive compensation and the executive pay gap of the company has a significant positive correlation with the company's performance, and increasing the salary of executives within a reasonable range and reasonably expanding the remuneration difference will help mobilize the work initiative of the company's senior management team. Thereby improving the company's performance.

The Economic (In) Significance of Executive Pay ESG Incentives

The Economic (In) Significance of Executive Pay ESG Incentives