Managerial remuneration and disciplining in the UK: A tale of two governance regimes
نویسندگان
چکیده
We simultaneously analyze two mechanisms of the managerial labor market (CEO turnover and remuneration schemes) in two different regulatory regimes, namely before and after the sweeping governance reforms adopted in the UK in the 1990s. We employ sample selection models to examine firms in a pre-Cadbury Code period (1988-1993) and a post-Combined Code period (1998-2004). CEOs’ compensation and CEO replacement are performance-sensitive in both periods. There is little evidence of outside shareholder monitoring, whereas powerful CEOs successfully resist replacement irrespective of corporate performance. With regard to CEO remuneration, we sketch a nuanced picture as we find some evidence supporting the alignment of interests hypothesis, but also supporting the managerial power or skimming model for managerial remuneration practices in the UK prior to the governance reforms. In particular, equity-owning CEOs compensate disappointing stock performance by augmenting their monetary compensation. Our results are consistent with the widely perceived failure of internal governance mechanism in tackling the agency problems associated with managerial pay: these mechanisms have relatively little impact on executive remuneration. We also conclude that the regulatory effort undertaken in the UK over the 1990s has had at best a moderate effect on increasing executives’ accountability and performance sensitivity of their turnover. JEL classification: G30; G32; G34; J33
منابع مشابه
Competition for Managers, Corporate Governance and Incentive Compensation
We propose a model in which firms compete to attract better managers by using corporate governance as part of an optimal executive compensation scheme. Higher governance decreases the cost of taking disciplinary actions against managers, but when managerial talent is scarce, competition among firms to attract better managers implies that firms under-invest in governance. The reason is that mana...
متن کاملOwnership, managerial control and the governance of companies listed on the Brussels stock exchange
This paper examines how corporate control is exerted in companies listed on the Brussels Stock Exchange. There are several alternative corporate governance mechanisms which may play a role in disciplining poorly performing management: blockholders (holding companies, industrial companies, families and institutions), the market for partial control, debt policy, and board composition. Even if the...
متن کاملeconomic analySiS of hiring formS dedicated to managerial poSitionS in poland ◊
This paper deals with the economic analysis of hiring forms dedicated to managerial positions. Theoretical frames for corporate governance are based on agency theory. Crucial problems considered within agency theory are: information asymmetry, conflict of interests and supervision (monitoring) of management. Presented analysis covers also remuneration forms and manager’s participation in owners...
متن کاملAssessment of Public Hospital Governance in Romania: Lessons From 10 Case Studies
Background The Government of Romania commissioned international technical assistance to help unpacking the causes of arrears in selected public hospitals. Emphases were placed on the governance-related determinants of the hospital performance in the context of the Romanian health system. Methods The assessment was structured around a public hospital governance framewor...
متن کامل