Performance measures, benchmarks and targets in executive remuneration contracts of UK firms

Zakaria, Idlan

doi:10.1016/j.bar.2012.07.005

Cited by 17 publications

(30 citation statements)

References 20 publications

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“…A stream of research has examined different mechanisms to align manager interests with shareholder needs. Examples of these mechanisms include the weights of compensation contract components, i.e., salaries, bonus, stock option, restricted stock and long-term incentive plans (Vieito et al , 2008), the choice and use of non-financial measures in compensation contracts (Ittner et al , 1997; Wiersma, 2009; Xi, 2010; Evans et al , 2010; Van Veen-Dirks, 2010; Zakaria, 2012), placing different weights on non-financial measures compared to financial measures (Ittner et al , 1997; Banker et al , 2000), the retention of non-financial measures in compensation contracts (HassabElnaby et al , 2005), and the adoption of a mix of financial and non-financial measures in compensation contracts and earnings management (Ibrahim and Lloyd, 2011), and the shareholder benefit from the pay-performance activism. (Fortin et al , 2014).…”

Section: Theory Prior Research and Hypotheses Developmentmentioning

confidence: 99%

The use of sustainability incentives in executive remuneration contracts

Abdelmotaal

Abdel-Kader

2016

JAAR

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Purpose The purpose of this paper is to examine which firm characteristics affect the usage of sustainability incentives in executive remuneration contracts, and whether these sustainability incentives have an impact on shareholders’ return. Design/methodology/approach The analysis is based on a sample of 212 firms from the FTSE 350 firms over the period of 2009-2011. Findings The results indicate that there is a significant relationship between the adoption of sustainability incentives in executive remuneration and firm size, compensation committee independence, the corporate social responsibility (CSR) sustainability committee, CSR sustainability index, and resource efficiency policy variables. Further, there is evidence to support a positive impact on the shareholders’ return. Research limitations/implications The results of this study should be interpreted within two limitations. First, the limited numbers of the sample years due to the limited number of firms used sustainability incentives. Second, the use of a dummy variable in the measurement of the adoption of sustainability incentives in the analysis. Practical implications The paper includes implications for the development of sustainability incentives within the performance measurement system and compensation contracts that could be a solution for the agency problem. Originality/value This study provides empirical evidence on an increased use of sustainability incentives in UK firms, and identifies firm’s characteristics that explain such increase in the sustainability incentives, finally its positive impact on the shareholders’ return.

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Section: Theory Prior Research and Hypotheses Developmentmentioning

confidence: 99%

The use of sustainability incentives in executive remuneration contracts

Abdelmotaal

Abdel-Kader

2016

JAAR

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“…Companies can report on the following aspects of executives' performance evaluations: criteria and time frames used, the frequency of evaluations, measurement tools used and the persons/committees conducting these reviews. In most instances, executive performance is evaluated against financial metrics such as return on assets (ROA), return on equity (ROE), earnings per share (EPS), total share return (TSR), economic value added (EVA) and market value added (MVA) (Bradley, 2013;Kuboya, 2014;Scholtz & Smit, 2012;Zakaria, 2012). Despite being widely used, all these criteria have shortcomings.…”

Section: Evaluating Executives' Performancementioning

confidence: 99%

Executive performance evaluation and remuneration: Disclosure and practices of selected listed South African companies (2002−2015)

Mans-Kemp

Viviers

2018

South African Journal of Accounting Research

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Given growing inequality in South Africa, shareholders are increasingly questioning the size and composition of executive remuneration packages. They are also demanding greater transparency on the criteria and processes used to award performance incentives. The researchers hence investigated the extent and depth to which a sample of companies listed on the Johannesburg Stock Exchange (JSE) disclosed details on their executive performance evaluations. Attention was furthermore given to whether these companies reported a link between their executives' pay and performance. The criteria and time frames used to evaluate and reward executive performance were also explored. Content analysis was performed on 2 136 annual/integrated reports over the period 2002 to 2015. Semi-structured personal interviews were also conducted with six directors serving on local remuneration committees. Controlling for company size, a significant increase was noted in the number of JSE-listed companies that disclosed information on their executive performance evaluations over the research period. The depth of these disclosures, however, remains superficial. As such, shareholders are constrained in their ability to hold remuneration committees accountable. These committees are encouraged to adopt a wider range of performance criteria and re-assess their focus on short-term performance. It is also suggested that commerce educators cultivate an appreciation for long-term, sustainable value creation among graduates.

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“…Jing, Wan and Gao (2010) highlighted that these three perspectives share a similar point which concentrates on how directors are paid and supported by the firm/company they work in. Most research in the past tend to look at directors' remuneration, often, to show proof that directors should be paid correctly while some studies (Canarella & Gasparyan 2008;Theeravanich 2013;Zakaria 2012;) try to link the directors' remuneration with the company's performance since remuneration can only be justified when a company is making a profit.…”

Section: Literature Review Definition Of Directors' Remunerationmentioning

confidence: 99%

“…If a firm has made a substantial amount of profit during the year, the directors' remuneration should increase and vice versa if the firm is not performing well. In the United Kingdom (UK), the process of how directors are actually rewarded remains to be elusive, exclusive and opaque (Zakaria 2012). It was also noted that such a remuneration structure has not changed over the years although share option plans and other long term plans have changed (Zakaria 2012).…”

Section: Directors' Remuneration and Firm Performance: Pay-performancmentioning

confidence: 99%

“…In the United Kingdom (UK), the process of how directors are actually rewarded remains to be elusive, exclusive and opaque (Zakaria 2012). It was also noted that such a remuneration structure has not changed over the years although share option plans and other long term plans have changed (Zakaria 2012). As an example, in 2011, Standard Chartered disclosed that its executives directors have target performance awards that were originally set with reference to market and individual experience levels (Standard Chartered 2011).…”

Section: Directors' Remuneration and Firm Performance: Pay-performancmentioning

confidence: 99%

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Directors' Influence on Pay-Based Performance

Rahim¹,

Nelson²

2018

AJAG

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The objective of this study is to examine earnings management influence on directors' remuneration. Taking a calculation of the empirical evidence of earnings management, firm performance and directors' remuneration, this study is able to demonstrate that pay-performance is not influenced by earnings management. Data for this study were extracted from the annual reports of 678 non-financial public listed companies in Malaysia for the years of 2009, 2010 and 2011 giving rise to final 2021 observations. The findings highlighted that earnings management played no role in determining the directors' remuneration. However, the findings documented a significant and positive association between the directors' influence and the directors' remuneration. This study contributes to the growing literature by providing evidence which demonstrate that pay-performance was not directly influenced by earnings management but by the influence of the executive directors. More importantly the study documents even under strong governance, Malaysian listed firms are influenced by the executive directors.

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Performance measures, benchmarks and targets in executive remuneration contracts of UK firms

Cited by 17 publications

References 20 publications

The use of sustainability incentives in executive remuneration contracts

The use of sustainability incentives in executive remuneration contracts

Executive performance evaluation and remuneration: Disclosure and practices of selected listed South African companies (2002−2015)

Directors' Influence on Pay-Based Performance

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