Changes in directors' incentive plans and the performance of firms in the UK

Although many companies in the UK adopted an incentive plan for their directors in response to the Cadbury recommendation, few studies have examined the effect of these incentive programmes on firm performance. We investigate whether companies with these incentive plans achieve better performances than those without. The most striking feature of this research may be that we find a strong connection between incentive compensation plans and the performances of firms. In particular, we find a positive relationship between the change of compensation policy and the change of firm performance.