Work

Heads I win, tails you lose? A career analysis of executive pay and corporate performance

Year: 2014

Type: article

Abstract: The paper adopts a novel career perspective to examine theories of corporate control in the context of executive pay. Detailed career histories of boardroom executives in all FTSE 350 companies between 1996 and 2008 are utilised. The paper highlights the failure of existing arrangements to adjust pay outcomes where career performance is poor. The leading theoretical reasons for this disconnect, namely managerial power and neoinstitutionalism, are not consistent with the data. The paper identifies a settling-up process at work, whereby pay is adjusted in the light of both past pay and past performance. From a policy perspective, a case is made for adopting a cumulative or career-oriented approach to rewarding executive performance through the use of truly long-term incentives in the form of ‘career shares’.

Source: Cambridge Journal of Economics

DOI: 10.1093/cje/beu049

Authors: Ian Gregory-Smith, Brian G. M. Main

Institutions: University of Sheffield, University of Edinburgh

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

Funder: Economic and Social Research Council

Award: Paying for performance: Realized pay and performance in CEO careers, an examination of outcomes.