A Review of the Current Literature on Executive Compensation: New Insights and Understandings

James, Phillip C.

doi:10.18533/jefs.v2i02.134

Cited by 4 publications

(5 citation statements)

References 58 publications

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“…Since the board of directors play a critical role in determining CEO pay, it can be difficult to define the exact factors that drive CEO pay in modern organizations. Finikelstein and Hambrick (1988) in James (2014) argue that the drivers of CEO compensation include, "market factors, the power and preferences of the board and CEO prerogatives. "…”

Section: Drivers Of Ceo Paymentioning

confidence: 99%

“…According to Finkelstein and Hambrick (1988) in James (2014) the politics of the organization are the main drivers of CEO pay. Shareholders exercise ownership of company but actual control of the company is in the hands of the board of directors.…”

Section: Power and Preferencesmentioning

confidence: 99%

“…The board of directors see the company as their main source of income whereas the shareholders want a good return on their investment. Therefore CEO pay levels are supposed to motivate the board of directors to do their work well to create the desired shareholder value (James, 2014). Studies on executive pay have also revealed that the total control or power that the board of directors wield, enable them to award themselves hefty salaries (James, 2014: Roe, 2003.…”

Section: Power and Preferencesmentioning

confidence: 99%

“…Therefore CEO pay levels are supposed to motivate the board of directors to do their work well to create the desired shareholder value (James, 2014). Studies on executive pay have also revealed that the total control or power that the board of directors wield, enable them to award themselves hefty salaries (James, 2014: Roe, 2003. When the CEO and the board of directors give themselves hefty salaries, shareholders need to respond and address this, "moral hazard" quickly in order to prevent the escalation of the agent problem (James 2014;Antle and Smith,1985).…”

Section: Power and Preferencesmentioning

confidence: 99%

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A Literature Review of the Perspectives of CEO Pay: An Analysis of Issues and Controversies

Manuere¹,

Hove²

2018

JPAG

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The purpose of this paper is to review the literature on various theories that are used in organisations today to determine executive compensation. This paper analyses the relevance of the theories that are used to determine CEO compensation in modern corporations. The paper makes an attempt to review extensively the literature on CEO compensation. This paper looks at the concerns of sixteen theories of executive compensation. This paper further analyses the special features that are associated with CEO pay. These features help us to understand the problems that experts on executive pay experience when they try to define the exact CEO pay when compared to other rewards that are non financial. The drivers of executive pay are quantified and qualified in order to provide the conceptual background needed to understand the core factors that determine executive pay. Therefore the role of institutional investors in driving managerial salary is explored in detail. Finally, the effects of firm size and good corporate governance on executive pay are carefully analysed.

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Section: Drivers Of Ceo Paymentioning

confidence: 99%

Section: Power and Preferencesmentioning

confidence: 99%

Section: Power and Preferencesmentioning

confidence: 99%

Section: Power and Preferencesmentioning

confidence: 99%

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A Literature Review of the Perspectives of CEO Pay: An Analysis of Issues and Controversies

Manuere¹,

Hove²

2018

JPAG

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“…In an attempt to understand what the main drivers of executive compensation are, James (2014) provided a review of the main journal articles which examined CEO compensation. The results showed that among the main factors that influence executive compensation were: firm size and performance, corporate governance issues and agency problems, the structure of the board of directors, executive power and tenure, market forces, insider trading restrictions, and company characteristics (James, 2014). Adding to the numerous scholarly studies there is the increasing commentary in the popular press and other media outlets about the rising levels of remunerations paid to executives of firms that have reported poor financial results or otherwise failing performances.…”

Section: Ceo Compensation In the Current Contextmentioning

confidence: 99%

CEO Compensation in the U.S.: Are CEOs Underpaid or Overpaid ?

James¹,

Kim²

2018

AFR

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This study investigates the adequacy of CEO compensation from the perspective of using accounting measures to assess the performance of CEOs. The main objective of this research is to determine to what extent compensation packages received by American CEOs represent an underpayment of CEOs based on the performance of their firms when firm performance is defined in terms of accounting measures. CEO compensation data are obtained from Compustat, 10K SEC filings, and Forbes listing of CEO data. The analysis covers a two-phased time period i.e., before and after the financial crisis in the USA. CEO compensation data are analyzed for the years 2004, 2005, 2006, and 2007 (pre-financial crisis) and for years 2009 to 2013 (post financial crisis). Multiple regression models consisting of six accounting performance measures are used to perform the analysis to determine the extent of CEO underpayment or overpayment. Having examined 1151 CEO compensation packages to determine if CEO underpayment exist in light of what is an overwhelming literature supporting CEO overpayment, the results show that 67.33% of the CEOs were in fact underpaid based on their firms performance, and only 32.67% (376 CEOs) were overpaid based on firm performance.

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Top executive compensation in less developed capital markets

Pereira

Esperança

2015

Corporate Governance

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Findings -The conclusions of this study are generally consistent with findings obtained in more developed capital markets. It was found that public and older corporations are more intensive users of variable pay, consistently with the agency theory prediction.Firms located in the centre of economic activity and executives with higher education increases the propensity to receive higher levels of salary in form of variable compensation. The relation between compensation and performance was more elusive.Research limitations/implications -There are limitations as to the extrapolation of our results as we can not measure the level of potential idiosyncrasy. Ideally, the study should be replicated in different contexts to control for country specific influences. Nevertheless, the main finding that performance related pay mechanisms are less used in countries where public corporations and potential agency problems are less pervasive should hold.Originality/value -As we focus on a small economy with a developing capital market, we contribute to executive compensation literature who has mostly analyzed firms based in well developed capital markets, with a higher separation of ownership and control (Anglo-Saxon countries).

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A Review of the Current Literature on Executive Compensation: New Insights and Understandings

Cited by 4 publications

References 58 publications

A Literature Review of the Perspectives of CEO Pay: An Analysis of Issues and Controversies

A Literature Review of the Perspectives of CEO Pay: An Analysis of Issues and Controversies

CEO Compensation in the U.S.: Are CEOs Underpaid or Overpaid ?

Top executive compensation in less developed capital markets

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