Assessing the Relationship of CEO Compensation and Company Financial Performance in the Restaurant Segment of the Hospitality Industry

Abstract

There is a perception that little relationship may exist between company performance and CEO compensation. CEOs have personal goals that can conflict with the interests of shareholders. One approach to resolving this has been to align the incentives of executives with the interests of the shareholders. This solution may affect how top executives behave, and the caliber of executives an organization attracts. Using the Nations Restaurant News Stock Index, this study examined the correlation between company performance and CEO compensation in the restaurant industry. Results show that a positive correlation exists, although weak, among CEO compensation, gross revenue, net income, and stock price. Regression analysis indicated that stock Nelson Barber, MS, CPA, is a Doctoral Student,

Does risk matter in CEO compensation contracting? Evidence from US restaurant industry

“…This finding is confirmative to previous research showing a positive association between pay and performance (Veliyath and Bishop, 1995;Barber et al, 2006;Dalbor et al, 2010). The firm risk variable (Risk) has a positive coefficient (0.1634) implying a greater total compensation for the CEO as the level of firm risk increases for a restaurant company.…”

“…Among those studies, Barber et al (2006) investigate the relationship between stock price and CEO compensation in the US restaurant industry. Similarly, Madanoglu and Karadag (2006) look into the effect of firm performance on the change of CEO cash compensation (pay-performance sensitivity).…”

How Closely Is Ceo Compensation Tied to Performance? an Examination of the U.S. Restaurant Industry

“…In the restaurant industry specifically, Barber, Ghiselli and Deale (2006) Jensen and Murphy (1990b) and Hall and Liebman (1998). Their elasticities for the sensitivity of total compensation to changes in shareholder wealth are .25 and .31, depending on the measure of luck utilized.…”

“…Kim and Gu (2005) examine the determinants of CEO compensation in the restaurant industry, but they do not include the value of stock options in their research. Barber, Ghiselli and Deale (2006) examine CEO compensation in the restaurant industry but do not calculate compensation elasticities specifically.…”

A descriptive examination of corporate governance in the hospitality industry

“…Despite the topic's overall popularity in the mainstream management field, hospitality researchers have focused on a single dimension of corporate governance; namely the relationship between executive compensation and firm performance (Barber et al, 2006;Gu and Choi, 2004;Kim andGu, 2005, Madanoglu andKaradag, 2008). In a recent study, Dahlstrom et al (2009) investigated a new dimension of governance in the hotel industry in Norway.…”