An empirical examination of the costs and benefits of executive stock options: Evidence from Japan

Katô, H.; Lemmon, Michael L.; Luo, M. Ronnier; Schallheim, James S.

doi:10.1016/j.jfineco.2004.09.001

Cited by 135 publications

(101 citation statements)

References 32 publications

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“…Therefore, such firms should offer more incentive compensation to align the interests of managers and shareholders. Many previous studies lend support to a positive association between growth opportunities and stock option incentives (e.g., Gaver and Gaver, 1993;Kato et al, 2005;Ryan and Wiggins, 2001). We use book-to-market ratio (BTOM) as an inverse measure of growth opportunities.…”

Section: Ownership Structurementioning

confidence: 86%

“…As a result, John and John (1993) predicts that in order to mitigate agency conflicts between debtholders and shareholders, stock-based awards should be negatively related to firms' financial leverage. Empirically, Bryan et al (2000), Chourou et al (2008), Ittner et al (2003), Kato et al (2005), Ryan and Wiggins (2001) and Uchida (2006) report a negative association between stock options and leverage. In contrast, Choe (2003) develops a model in which stock option awards increase in leverage.…”

Section: Financial Constraintsmentioning

confidence: 94%

“…For the U.S., stock options are almost always granted at-the-money (Kole, 1997;Murphy, 1999). For Japan and Finland, the stock option premium is 5% and 10%, respectively (Kato et al, 2005;Liljeblom et al, 2011). Options in our sample have a term between three to ten years.…”

Section: Ownership Structure Variables Include Managerial Ownership (mentioning

confidence: 99%

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Determinants Of Stock Option Use By Chinese Companies

Luo¹

2015

JABR

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Section: Ownership Structurementioning

confidence: 86%

Section: Financial Constraintsmentioning

confidence: 94%

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Determinants Of Stock Option Use By Chinese Companies

Luo¹

2015

JABR

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“…There is increased use of performance based pay amongst younger workers (Lee, Iijima & Read, 2011). Since the 1997 reforms legalizing share ownership plans there has been a gradual dissemination of such schemes across Japan (Kato Lemmon, Luo & Schulheim, 2005).…”

Section: Mncs and Comparative Capitalismsmentioning

confidence: 99%

Are MNCs norm entrepreneurs or followers? The changing relationship between host country institutions and MNC HRM practices

Brookes

Brewster

Wood

2017

The International Journal of Human Resource Management

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Abstract:Rooted in the literature on comparative capitalism, we examine the effects of host country institutions on the intra organizational practices of MNCs, using transnational level survey data, exploring change over time.We found that the less comprehensive institutional mediation of the Liberal Market Economies correlated with greater diversity and a more pronounced difference between domestic firms and foreign MNCs.However, rather than being the predicted norm entrepreneurs, MNCs tended to follow the lead of local firms in adjusting HRM policies and practices towards liberalization. Those most prone to challenging existing orders were in industries facing particular crises of competitiveness. Finally, we found that single regulatory features exerted particularly strong effects on the individual firm practices encompassed in this study, rather than complex assemblies of institutions.

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“…73 Similarly, significant portion of executive compensation packages has traditionally been in the form of perquisites as opposed to salary, which has to some extent changed with the recent introduction of stock options in Japan. 74 interest, institutional investors, with a long-term stake and therefore interested in the long-tem sustainability of corporations, have been a driving force in maintaining lower compensation levels in Japan. Specifically, Japanese banks have played a critical role in controlling excessive compensation, particularly in keiretsu firms.…”

mentioning

confidence: 99%

Why Does Executive Greed Prevail in the United States and Canada but Not in Japan? The Pattern of Low CEO Pay and High Worker Welfare in Japanese Corporations

Salazar

Raggiunti

2013

SSRN Journal

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Abstract:According to a list of the 200 most highly-paid chief executives at the largest U.S. public companies in 2013, Oracle's Lawrence J. Ellison remained the best paid CEO and earned $96.2 million as total annual compensation last year. He has received $1.8 billion over the past 20 years. The lowest paid on the same list is General Motors' D. F. Akerson who earned $11.1 million. The average national pay for a non-supervisory US worker was $51,200 last year and a CEO made 354 times more than an average worker in 2012. Hunter Harrison, Canadian Pacific Railway Ltd., was the best paid CEO in Canada for 2012 and received $49.2-million as total annual compensation, significantly higher than the 2011 best paid CEO, Magna's F. Stronach who received $40.9 million. In 2011, the average annual salary was $45,488 and Canada's top 50 CEOs earned 235 times more than the average Canadian. These executive pay practices contrast with the growing inequality in Canada, recently illustrated with the finding that 40% of Indigenous children live in poverty. In contrast, Japan's highest paid CEO is Nissan Motor Co.'s Carlos Ghosn who earned 988 million yen (US$10.1 million) in the year ended March 2013, little changed from the previous year and modestly improved from his US$ 9.5 million compensation for 2009. That does not even put him among the top 200 most highly-paid U.S. company chiefs and the top 20 best paid CEOs in Canada for 2012. Why are Japanese CEOs paid considerably less than their American or Canadian counterparts? This essay argues that the activism of long-term oriented institutional investors such as banks and the tying of executive pay to worker welfare in the context of a culture of intolerance to excessive executive compensation explain to a great extent the development of a pattern of low executive pay in Japan despite the recent weakening of bank monitoring as a result of the adoption of U.S. governance style in some Japanese companies. The Japanese experience also demonstrates that lower executive compensation does not result in compromising firm performance and is a necessary condition to build a stakeholder-friendly corporation. For example, the CEO of Toyota (world's biggest automaker), Akio Toyoda, earned 184 million yen ($1.9 million) in 2012, a 35 percent increase from the previous year. He is the lowest-paid chief of the world's five biggest automakers and led Toyota to generate the highest return last year among the top five global automakers. Toyota's outlook for increasing profit prompted the automaker to approve the biggest bonus for workers in the last years. Alan Mulally, Ford Motor's chief and the best paid among the top five, took home $21 million in 2012. Keywords

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An empirical examination of the costs and benefits of executive stock options: Evidence from Japan

Cited by 135 publications

References 32 publications

Determinants Of Stock Option Use By Chinese Companies

Determinants Of Stock Option Use By Chinese Companies

Are MNCs norm entrepreneurs or followers? The changing relationship between host country institutions and MNC HRM practices

Why Does Executive Greed Prevail in the United States and Canada but Not in Japan? The Pattern of Low CEO Pay and High Worker Welfare in Japanese Corporations

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