Onwards and Upwards: Why Companies Change their Executive Remuneration Schemes,and Why This Leads to Increases in Pay
Much has been written about the phenomenon of ever-increasing executive pay inlisted companies. This paper examines some of the underlying reasons for thiscontinued increase in executive directors’ remuneration. It reports the resultsof 40 interviews with protagonists in the remuneration debate in FTSE 350companies, exploring the types of change made and the reasons given for thesechanges. This issue has not specifically been addressed by previous studies.Reasons given for making changes included: increases due to being below market;changing performance-related schemes that did not pay out or paid less than theanticipated amount; changes in the company's culture or strategy; changes tosenior personnel (executive and non-executive); compliance with good humanresources practice; and a perceived need to comply with best practice incorporate governance. The results are analysed through two theoretical lenses.An agency theory explanation provides insight into the structure of executiveremuneration contracts, and expectancy theory suggests why schemes might bechanged to motivate the executives. The expectancy theory explanation tempersthe agency theory explanation, showing why changes are made even though this maylead to moral hazar
Year of publication: |
2007-07-01
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Authors: | Bender, Ruth |
Publisher: |
Blackwell Publishing Ltd |
Saved in:
freely available
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