The impact of customer satisfaction on CEO bonuses

O'Connell, Vincent; O’Sullivan, Don

doi:10.1007/s11747-010-0218-1

Cited by 30 publications

(21 citation statements)

References 92 publications

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“…This difference is not statistically significant between the two groups of observations. Finally, multicollinearity (O"Connell, 1995) does not appear to be a problem in this study as the highest pair-wise correlation coefficient is 0.625 (untabulated), and the highest variance inflation factor is less than 2.5 (O"Connell and O"Sullivan, 2011). Table 3 presents After controlling for economic factors, the overall results suggest that managers are exercising discretion in the reporting of goodwill impairment losses following the adoption of IFRS 3, as indicated by the significant coefficients for BATH, SMOOTH and ∆CEO.…”

Section: Resultsmentioning

confidence: 65%

The Effect of Audit Quality and Audit Committees on Goodwill Impairment Losses

Dabbous

Abughazaleh

Al-Hares

2015

ijafr

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Using a sample of 528 firm-year observations, drawn from the top 500 U.K. listed firms, this study examines the effect of audit quality and audit committee (hereafter: AC) characteristics on goodwill impairment losses recorded following the mandatory adoption of IFRS 3 “Business Combinations”. The hypothesis investigated is that managers disciplined by effective ACs and auditors are less likely to act opportunistically but instead use their accounting discretion to convey their private information resulting in the recognition of higher amounts of existing goodwill impairments that better reflect the underlying performance of the firm. Shareholders will not expect ACs and auditors to constrain accounting choices (e.g., goodwill impairments) used credibly by managers. After controlling for economic factors and financial reporting incentives, empirical results reveal that auditor and AC characteristics do not seem to have a significant effect on the recognition of goodwill impairments. Although ACs are expected to act as a monitoring device, the monitoring incentives of AC directors may be hampered by the joint board responsibility for the quality of financial reporting. The results also suggest that the formation of ACs does not always necessarily imply effective monitoring as ACs may fall short of doing what are generally perceived as their duties (Sommer, 1991). These results may be of interest to standard setters, regulators and policy makers.

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Section: Resultsmentioning

confidence: 65%

The Effect of Audit Quality and Audit Committees on Goodwill Impairment Losses

Dabbous

Abughazaleh

Al-Hares

2015

ijafr

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“…Prior studies argue that CSR reporting provides information about firm performance beyond the information contained in accounting numbers such as earnings. For instance, customer satisfaction and spill‐over effects of word of mouth advertising have been shown to be positively associated with firm performance (Gruca & Rego, ; Ittner & Larcker, ; O'Connell & Sullivan, ; Tuli & Bharadwaj, ). Additionally, socially responsible firms appeal to certain customers and have been found to be associated with superior sales and firm performance (Lev et al., ).…”

Section: Introductionmentioning

confidence: 99%

Powerful CEOs, cash bonus contracts and firm performance

Bachmann

Loyeung

Matolcsy

et al. 2019

Business Fin & Account

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We investigate whether powerful chief executive officers (CEOs) influence the conditions of their cash bonus contracts. Specifically, we examine (i) the association between CEO power and the proportion of ex‐ante cash bonus to base salary (bonus ratio), (ii) the association between CEO power and the relative use of non‐financial to financial performance targets in cash bonus contracts, and (iii) the performance consequences of incorporating non‐financial targets in cash bonus contracts. Results show that powerful CEOs are associated with greater ex‐ante bonus ratios and higher proportions of non‐financial performance targets compared to less powerful CEOs. Furthermore, the use of quantitative and corporate social responsibility (CSR)‐related non‐financial performance targets is positively associated with subsequent firm performance, and the use of undefined non‐financial performance targets is negatively associated with subsequent firm performance. These results are robust to alternative econometric specifications and variable definitions.

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“…To measure Customer satisfaction we use the satisfaction scores reported in the American Customer Satisfaction Index (ACSI) published by the National Quality Research Centre at the University of Michigan. Studies have used ACSI as a proxy for the customer satisfaction information used by internal and external stakeholders such as shareholders (Ittner and Larcker, ), bondholders (Anderson and Mansi, ), financial analysts (Luo, Homburg, and Wieseke, ), and compensation committees (O'Connell and O'Sullivan, ). As Luo and Homburg () note, the ACSI database is unique in that it utilizes the same methodology for sampling, surveying, and estimation across firms and years.…”

Section: Methodsmentioning

confidence: 99%

“…Customer satisfaction is the NFM that firms most frequently refer to in their proxy statements (Chen, Matsumura, and Shin, ; Murphy, ). Studies in marketing and accounting demonstrate that customer satisfaction influences the compensation paid to CEOs (Chen, Matsumura, and Shin, ; O'Connell and O'Sullivan, )…”

Section: Theoretical Framework and Hypothesesmentioning

confidence: 99%

The influence of lead indicator strength on the use of nonfinancial measures in performance management: Evidence from CEO compensation schemes

O'Connell

O’Sullivan

2013

Strat. Mgmt. J.

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Nonfinancial measures (NFMs) are a common feature of strategic performance management frameworks. We examine the role of one widely used NFM: customer satisfaction, in one aspect of strategic performance management: CEO compensation schemes. Drawing on agency theory precepts, we hypothesize that the extent to which firms link CEO compensation to customer satisfaction is influenced by satisfaction's ability to act as a leading indicator of future profitability (lead indicator strength). We further hypothesize that the extent to which customer satisfaction's lead indicator strength influences the weighting of satisfaction in CEO compensation schemes has a positive influence on future shareholder value. Our empirical results offer strong support for both hypotheses and extend research on the use and efficacy of NFMs in CEO compensation schemes.

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The impact of customer satisfaction on CEO bonuses

Cited by 30 publications

References 92 publications

The Effect of Audit Quality and Audit Committees on Goodwill Impairment Losses

The Effect of Audit Quality and Audit Committees on Goodwill Impairment Losses

Powerful CEOs, cash bonus contracts and firm performance

The influence of lead indicator strength on the use of nonfinancial measures in performance management: Evidence from CEO compensation schemes

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