Managerial Control, Performance, and Executive Compensation.

Gómez‐Mejía, Luis R.; Tosi, Henry L.; Hinkin, Timothy R.

doi:10.2307/255895

Cited by 394 publications

(173 citation statements)

References 28 publications

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“…There is increased scrutiny levelled at the remuneration committees of companies, especially those that have increased CEO compensation, even when they face disappointing financial results (Bussin 2015). Gomez-Mejia, Tosi and Hinkin (1987) used CEO remuneration as a proxy for executive compensation and concluded that the payment of CEOs is more responsive to performance in companies that have dominant shareholders and are owner controlled. The allocation of company profits is generally based on the condition of achieving a certain level of return on equity employed or a specified dividend, or even both.…”

Section: Literature Reviewmentioning

confidence: 99%

The relationship between remuneration and financial performance for companies listed on the Johannesburg Stock Exchange

Kirsten

Toit

2018

SAJEMS

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Background: The executive directors of a company are the agents of the shareholders and should manage the company in the best interest of the shareholders, not only for personal gain. It is therefore important for companies to ensure that they implement remuneration policies which will result in motivated employees who will execute decisions and actions which are in the best interest of the shareholders. However, it is widely acknowledged that the relationship between company performance and executive remuneration is weak. This implies that executives are still rewarded excessive remuneration regardless of the performance of their companies. Aim: The purpose of this study was to determine whether a relationship exists between the performance-based remuneration of executive directors and the financial performance of South African companies. Setting: The study was conducted in South Africa, specifically on companies listed on the Johannesburg Stock Exchange. Methods: The study design was quantitative and made use of a Pearson correlation and generalised least squares regression with bootstrapping at a 95% confidence interval to analyse the relationship between executive director remuneration and the financial performance of 42 companies in the consumer goods and services industry of the Johannesburg Stock Exchange (JSE) from 2006 to 2015. Results: The study established that the remuneration policies in place for South African executive directors within the consumer goods and services industry seem to be affected by the share price of the company. Conclusion: In the South African environment, executive director remuneration is thus not directly related to profitability or company size, as was the case in some earlier studies. The link between executive director remuneration and share performance may be an indication that remuneration policies are based on the share price and are thus directly connected to the principle of shareholder wealth maximisation.

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Section: Literature Reviewmentioning

confidence: 99%

The relationship between remuneration and financial performance for companies listed on the Johannesburg Stock Exchange

Kirsten

Toit

2018

SAJEMS

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“…The groundbreaking analysis of Jensen and Meckling (1976) led to voluminous scholarly and commercial research to identify correlations between various variables of Bgood^governance (Agrawal and Knoeber 1996;Boyd 1995;Carpenter and Golden 1997;Dalton et al 1998;Fama 1980;Gomez-Mejia et al 1987). Indeed, the language of the scholarship and policy discussion alike invoked market mechanisms, prices, incentives, and other aspects that evoke neo-classical economics and suggests a mentality of governance 1 steeped normatively in property rights and shareholder value maximization, empirically in emerging measurements of total shareholder return (Rappaport 1981(Rappaport , 1986, and not far beneath the surface in a faith that the efficiency of markets brought wisdom.…”

Section: Discourses Of Governance and Their Assumptionsmentioning

confidence: 99%

Edging Toward ‘Reasonably’ Good Corporate Governance

Nordberg

2018

Philosophy of Management

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Over four decades, research and policy have created layers of understandings in the quest for Bgood^corporate governance. The corporate excesses of the 1970s sparked a search for market mechanisms and disclosure to empower shareholders. The UK-focused problems of the 1990s prompted board-centric, structural approaches, while the fall of Enron and many other companies in the early 2000s heightened emphasis on director independence and professionalism. With the financial crisis of 2007-09, however, came a turn in some policy approaches and in academic literature seeking a different way forward. This paper explores those four phases and the discourse each develops and then links each to assumptions about accountability and cognition. After the financial crisis came pointers n policy and practice away from narrow, rationalist prescriptions and toward what the philosopher Stephen Toulmin calls Breasonableness^. Acknowledging that heightens awareness of complexity and interdependence in corporate governance practice. The paper then articulates a research agenda concerning what Breasonably^good corporate governance might entail.

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“…Marginal productivity theory argues that the compensation of workers reflects the extent to which they contribute to the performance of their organizations (Gomez-Mejia, Tosi, & Hinkin, 1987;Roberts, 1956), thereby predicting a high congruence between pay and performance of college football coaches. Second, human capital theory explains that managerial compensation is influenced by the amount of one's skills and experience, which implies the high compensation of experienced coaches (Becker, 1964;Holcomb, Holmes, & Connelly, 2009).…”

Section: Roles Of Performance and Human Capital In College Football Cmentioning

confidence: 99%

“…In the managerial compensation literature, marginal revenue product (MRP) refers to the difference between the actual level of firm performance achieved by its current executive and the expected amount of that firm's performance achieved by the next best alternative executive (Gomez-Mejia et al, 1987;Roberts, 1956). Under the assumption that perfect information and alternatives are continuously available for both the executive and the firm, the executive is thought to receive compensation equal to the value of his or her MRP (Gomez-Mejia et al, 1987;Roberts, 1956).…”

Section: Positive Relationship Between Past Performance and Total Commentioning

confidence: 99%

“…Under the assumption that perfect information and alternatives are continuously available for both the executive and the firm, the executive is thought to receive compensation equal to the value of his or her MRP (Gomez-Mejia et al, 1987;Roberts, 1956). However, since this assumption is unlikely to hold in reality, the actual compensation of executives tends to be lower than their MRPs (GomezMejia et al, 1987;Roberts, 1956).…”

Section: Positive Relationship Between Past Performance and Total Commentioning

confidence: 99%

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Roles of Performance and Human Capital in College Football Coaches’ Compensation

Inoue

Plehn-Dujowich

Kent

et al. 2013

Journal of Sport Management

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Despite the escalation of football coaches’ salaries at National Collegiate Athletic Association (NCAA) Football Bowl Subdivision (FBS) institutions, little empirical investigation has been undertaken to identify the determinants of their compensation. As such, the purpose of this study is to explain how the level of coaching compensation is determined based on three theoretical perspectives in managerial compensation: marginal productivity theory, human capital theory, and managerialism. The analysis of compensation data of head football coaches at FBS institutions in 2006–2007 shows that the maximum total compensation of these coaches increases with their past performance. The results further reveal that coaches with greater human capital tend to receive a compensation package where bonuses account for a smaller proportion of the maximum total compensation. Overall, these findings mostly confirm the predictions drawn from managerial productivity theory, human capital theory and managerialism.

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Managerial Control, Performance, and Executive Compensation.

Cited by 394 publications

References 28 publications

The relationship between remuneration and financial performance for companies listed on the Johannesburg Stock Exchange

The relationship between remuneration and financial performance for companies listed on the Johannesburg Stock Exchange

Edging Toward ‘Reasonably’ Good Corporate Governance

Roles of Performance and Human Capital in College Football Coaches’ Compensation

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