Executive Compensation

Executive Compensation

In light of the recent AIG bonus controversy, the staff of the "Bud" Johnston library has compiled a set of books and articles discussing the topic of Executive compensation.

If you will take a look at the title and then the date of the following book, you will see that the situation is not necessarily NEW and of this generation of executive's making.
Business International Corporation. Worldwide Executive Compensation : New Problems & Solutions. RDL HD4965.2.B85 c1974.

See also:

The Executive PayWatch Database for executive compensation by company.

The BMO report on Executive Compensation.

The Watson Wyatt Survey  Effect of Economy on Executive Compensation Programs. March 2009 Executive Summary

The Center on Executive Compensation

The Business Library document on Corporate Governance

Terence Corcoran's Comment -- "Hang the Bankers" in The Financial Post of April 2, 2009

For Faculty and PhD's with Membership in WRDS please refer to the Executive Compensation database for historical data on bonuses and other compensation components.

Ivey Connection

Interview with Prof. Colette Southam October 2009 Impact publication

Presentation and Q&A with Stephen Sapp October 2007 Impact publication
Click here to download audio/visual presentation. Click here to listen to the Q&A.

Murray Bryant - research director for the Blue Ribbon Commission on the Governance of Executive Compensation.
ICD Blue Ribbon Commission Report

Stephen Sapp - Sweet Deal in Canadian Investment Review v.21 Iss 3 pg. 18-23

The article discusses the ways by which Canadian regulators can curb the excessive chief executive officer pay packages. It was observed that the executive compensation is seen as a problem in Canada, but not at the same level as in the U.S. A report by the Institute of Corporate Directors Blue Ribbon Commission discusses how good governance can come from independent and diligent directors on the human resources committee following a strong process to design executive compensation packages.

Stephen Sapp - The Impact of Corporate Governance on Executive Compensation. European Financial Management;  Sep2008, Vol. 14 Issue 4, p710-746

This paper examines the relationship between the compensation of the top five executives at a set of over 400 publicly listed Canadian firms and various internal and external corporate governance-related factors. The media is full of stories suggesting a relationship between large executive compensation packages and failures in governance at various levels within organisations, but there exists little formal analysis of many of these relationships. Our analysis provides empirical evidence supporting some of these assertions, refuting others and documenting new relationships. We find that variances in internal governance related to differences across firms in the characteristics of the CEO, compensation committee and board of directors do influence both the level and composition of executive compensation, especially for the CEO. Considering external measures of corporate governance, we find that different types of shareholders and competitive environments impact executive compensation. We do not find that either the internal or external governance characteristics dominate

Books- from the most recent to older editions

Ellig, Bruce R. The complete guide to executive compensation [electronic resource]

Lipman, Frederick D. Executive Compensation Best Practices. BUS stack HD4965.2.L57 2008
Executive Compensation Best Practices demystifies this topic, with a hands-on guide providing compensation guidance for all members of the board, as well as best practice guidance for compensation committee members and executives who work with the compensation committee."

Kolb, Robert (ed.) The Ethics of Executive Compensation. BUS stack  HD4965.2.E84 2006

Tyson, Shaun  and Frank Bournois (eds) Top Pay and Performance : International and Strategic Approach. BUS stack HD4965.2.T67 2005
Top Pay and Performance is structured so that it begins with the debates on Director level pay and corporate governance and then examines the evidence on transparency and reporting standards in Europe. The book then looks at detailed descriptions of top pay in France and Germany, before going on to look at equity incentives, reward design and the management of reward structures through remuneration committees and at rewards as part of human resource strategy.

Bebchuk, Lucian A. Pay Without Performance : the Unfulfilled Promise of Executive Compensation. BUS stack HD4965.2.B43 2004
Pay without Performance presents a disconcerting portrait of executives' power to influence their own pay - and of the structural defects in corporate governance that give them this power. As this book demonstrates, boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee.

Chingos Peter T. Responsible Executive Compensation for a New Era of Accountability. BUS stack HD4965.2.R47 2004
Responsible Executive Compensation for a New Era of Accountability provides a detailed road map to altering executive compensation programs to comply with the new accounting rules.

Ellig, Bruce R. The Complete Guide to Executive Compensation. BUS stack HD4965.2.E438 2002
"The competition for executive talent is fierce, making it imperative that executive compensation programs become an integral part of every company's strategic business plan.

Overton, Bruce B. Executive Compensation Answer Book. Supplement. BUS stack  HD4965.2.O84 1995 Suppl.

Pavlik, Ellen L. Determinants of Executive Compensation : Corporate Ownership, Performance, Size, and Diversification. BUS stack  HD4965.2.P38 1991

Copeman, George Henry. Motivating Management : Rewarding Executives with Cash or Shares. BUS stack ovrsize HF5549.5.I5C66 1986

Ellig, Bruce R. Executive Compensation : A Total Pay Perspective. BUS stack HD4965.2.E44

Cheeks, James. How to Compensate Executives. BUS stack   HD4965.2.C45 1979

Bacon, Jeremy. Corporate Directorship Practices : Compensation, 1977. BUS stack HD2745.B148 1977

Smyth, David J. Size, Growth, Profits, and Executive Compensation in the Large Corporation : A Study of the 500 Largest United Kingdom and United States Industrial Corporations. BUS stack HD69.S5S58 1975

Articles

Kalyta, Paul. Compensation Transparency and Managerial Opportunism: A Study of Supplemental Retirement Plans. Strategic Management Journal.  April 2009

Jansen, Thijs. On the Impact of Managerial Bonus Systems on Firm Profit and Market Competition: The Cases of Pure Profit, Sales, Market Share and Relative Profits Compared. Managerial & Decision Economics. April 2009
By designing remuneration schemes based on a bonus rewarding specific firm-level outcomes, the owners/shareholders of a firm can manipulate the behavior of their managers. In practice, different bonus anchors take center stage: some are profit-based, others use sales as the key yardstick and still different ones focus on relative performance vis-à-vis a peer group. In this paper, we focus on the impact of remuneration schemes on firm-level profitability.

Kate Kelly. Wall Street Pursues Pay Loopholes --- Compensation Caps Drive Some Firms to Weigh Options; Higher Salaries? Wall Street Journal. Mar 17, 2009

Colvin, Geoff. Chris Dodd Wants to Scrap Your Bonus. Fortune March 16, 2009
The author offers opinions on a provision of the U.S. American Recovery & Reinvestment Act economic stimulus law which places restrictions on the salaries of executives of financial services firms receiving funds from the Troubled Asset Relief Program bailout. The limits, introduced into the law by Senator Christopher Dodd, are said to be unfair and unnecessary.

Anonymous. The Conference Board Announces Executive Compensation Task Force PR Newswire. Mar 12, 2009.

Richard R. Floersch. The Right Way to Determine Executive Pay. Wall Street Journal Mar 5, 2009

Bartiromo, Maria. Nell Minow On Outrageous CEO Pay--and Who's To Blame. Business Week. March 2, 2009
An interview with Nell Minow, editor and co-founder of The Corporate Library, is presented. She discusses the general public's anger over the issue of executive compensation. Other topics include her opinion that there has been a vacuum of leadership from the business community on executive compensation.

Maiello, Michael. Is $500,000 Fair? Forbes. March 2009
The article discusses possible ways of reforming compensation practices in the financial services industry. One contributing factor to an ongoing financial crisis was the payment of bonuses for short-term performance without regard to associated long-term risks. UBS has implemented a plan whereby only 33% of an executive’s bonus is paid out each year.

Barrington, Linda. CEO Compensation. Leadership Excellence. March 2009

Cuñat, Vicente. Executive Compensation and Competition in the Banking and Financial Sectors. Journal of Banking & Finance. March 2009
This paper studies the effect of product market competition on the compensation packages that firms offer to their executives.

Landry, John T. Firms Still Willing to Pay Dearly for Talent. Harvard Business Review March 2009

Craig, Susanne. Cuomo, Frank Seek to Link Executive Pay, Performance. Wall Street Journal March 13, 2009
The article reports that New York state attorney general Andrew Cuomo and U.S. congressman Barney Frank are discussing how executive compensation in New York City's financial industry could be tied to a firm's long-term performance. No legislation has been drafted, although Frank indicated Congress would eventually address the issue.

Harris, Jared. What’s Wrong with Executive Compensation? Journal of Business Ethics.Mar. 2009 Suppl.1
I broadly explore the question by examining several common criticisms of CEO pay through both philosophical and empirical lenses. While some criticisms appear to be unfounded, the analysis shows not only that current compensation practices are problematic both from the standpoint of distributive justice and fairness, but also that incentive pay ultimately exacerbates the very agency problem it is purported to solve.

Samuelson, Judith F.  Are Executives Paid Too Much? Wall Street Journal Feb. 26, 2009
The author criticizes that restriction of companies that accept U.S. federal bailouts fund from paying performance bonuses that exceed one-third of an executive's total annual compensation. They explain two trends in the business world that led to the financial crisis. They suggest the adoption of three strategies recommended by the Aspen Group for getting business back on track. The authors also argue that incentive-based pay be based on long-term metrics.

Hall, Steven. Executive Pay Caps: Proceed with Caution. Business Week Online. Feb. 23, 2009
The article focuses on the need of viewing with caution the measures that limit executive compensation in the U.S. According to the article, efforts to enforce executive compensation gained results contrary to the stated purpose of such actions. It stated that the Barack Obama Administration must acknowledge that a variety of measures would more effectively address the crisis of confidence in business leadership without depriving companies of the talent they need to pull out of this crisis.

Bebchuk, Lucian. Congress Gets Punitive on Executive Pay. Wall Street Journal. Feb. 17, 2009.
The author argues against the right restrictions on pay arrangement in all financial firms that have or will receive funds from the U.S. federal government's Troubled Asset Relief Program (TARP). He claims that such restrictions weaken executives' incentives to deliver the long-term performance needed to benefit the economy. He recommends tightening the link between pay and long-term performance. The author also examines the adverse effects of the restrictions on incentives.

Byrnes, Nanette. A Better Way To Reward Executives? Business Week  Feb. 16, 2009
The article looks at the use of "bonus bank" as a form of executive bonuses. The concept of bonus bank revolves around money being deposited into an account, which executives may withdraw from provided they meet expectations for operations and other benchmarks.

Bray, Chad. Merrill Gave $1 Million Each to 700 Of Its Staff. Wall Street Journal. Feb. 12, 2009
The article reveals that Merrill Lynch & Co. has secretly moved up the date it awarded bonuses for 2008 and richly rewarded its executives in spite of huge amounts of losses, according to New York Attorney General Andrew Cuomo. A total of $3.6 billion bonuses were awarded to over 39,000 Merrill Lynch employees prior to its purchase by Bank of America Corp., says Cuomo. He criticizes the secret and premature awarding of the bonuses. Cuomo also found out that several individuals received more than $1 million in bonuses.

Maremont, Mark. Loopholes Sap Potency of Pay Limits. Wall Street Journa. Feb. 6, 2009
The article discusses the potential impact of plans by U.S. President Barack Obama to cap the salaries of senior executives at companies that receive extraordinary, future financial assistance from the U.S. government. Although some praised the measure, others said too many opportunities existed to circumvent the cap.

Details of Executive Pay Plan. Business Week Online. Feb. 5, 2009
The article discusses the guidelines on executive pay by the U.S. Treasury Department for financial institutions that are receiving government assistance issued on February 4, 2009. Reportedly, the measures are designed to ensure that public funds are directed to the public interest in strengthening the economy by stabilizing the financial system. Details on the provisions of the guidelines are offered.

Byrnes, Nanette. Executive Pay: Will the Big Bucks Stop Here? Business Week Online. Feb. 5, 2009

David O Friedrichs. Exorbitant CEO compensation: just reward or grand theft? Crime, Law and Social Change. Feb 2009

Executive Pay Declined With Economy. Report on Salary Surveys. Jan 2009

Jordan, Hannah. Senior Managers Got the Biggest Pay Rises in 2008, Survey Shows. Third Sector Jan. 8, 2009
The article reports that salaries of senior fundraising managers increased faster compared to that of junior or middle managers in 2008. According to the annual fundraising salary survey published in January 2009 by the recruitment agency Kage Partnership, average salaries increased up to 7.5 percent and 3.7 percent, respectively for senior and junior level managers.

Keller, George M. Slow Down the Gravy Train.  Directors & Boards. 2009
The article reflects on the issue of overcompensation paid to top executives in business enterprises in the U.S. It opines that job responsibilities and risks faced by corporate chief executive officers (CEO) do not justify multimillion-dollar compensation. It comments that board compensation committees are aware of the increasing gap between the CEO and the rest of his organization. It is opined that the key objective of the committees should be pay efficiency.

McGregor, Jena. Executive Pay: Time for a Trim. Business Week Online. Dec. 23, 2008
The article focuses on several companies which have filed plans to reduce its executive salaries. Frederick W. Smith, chief executive officer (CEO) of shipping giant FedEx Corp. has reduced his salary by 20%, as well as 7.5% to 10% of senior officers' salaries to save costs. Motorola Inc.'s CEOs, Greg Brown and Sanjay Jha, by 25%, and Western Digital Corp. (WDC) cut a third of its CEOs salary. David Wise, Hay Group senior consultant stated that this move by several firms has a leveraging effect.

Robert F Göx. Tax incentives for inefficient executive pay and reward for luck.Review of Accounting Studies.Dec 2008

Anonymous. The Hiring Dynamic and High Level Executive Compensation is Changing. Business Wire. Nov 19, 2008