Download or read book CEO Power and Relative Performance Evaluation written by Shane S. Dikolli and published by . This book was released on 2016 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We model relative performance evaluation (RPE) when a Chief Executive Officer (CEO) has the power to opportunistically influence the design of RPE by choosing the weight on an index-based peer group or by customizing the selection of peers comprising a peer group. A powerful CEO compares the benefits of reducing common risk affecting his compensation with the benefits of receiving a higher bonus by economizing on expected peer-group performance. The Board of Directors (BoD) is less likely to use RPE if a powerful CEO can influence RPE design. Our analytical model yields hypotheses predicting that powerful CEOs choose to reduce common risk only partially and that BoDs choose to not implement RPE if expected peer performance is sufficiently high. Our model has further empirical implications in (1) providing new interpretations of tests for detecting strong-form and weak-form RPE in the presence of powerful CEOs, and (2) suggesting a new empirical measure of CEO power with a focus on the delegation of RPE decision rights.
Download or read book Governance CEO Power and Relative Performance Evaluation Effectiveness written by Lin Ge and published by . This book was released on 2018 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study whether changes in corporate governance and CEO power affect bonus-based implicit relative performance evaluation (RPE). We rely on a regression discontinuity design of shareholder proposals to proxy for shocks to CEO power. The effect of shareholder proposals on RPE is stronger under situations where shareholder proposals are expected to better capture changes in CEO power. We identify important real effects associated with the strengthening of RPE and find that idiosyncratic risk increases and co-movement decreases between firms and their peers in terms of changes in capital and inventory investment and changes in Tobin's Q after a shareholder proposal is passed.
Download or read book Relative Performance Evaluation for Chief Executive Officers written by Robert Gibbons and published by . This book was released on 1989 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Measured individual performance often depends on random factors which also affect the performances of other workers in the same firm, industry, or market. In these cases, relative performance evaluation (RPE) can provide incentives while partially insulating workers from the common uncertainty. Basing pay on relative performance, however, generates incentives to sabotage the measured performance of co-workers, to collude with co-workers and shirk, and to apply for jobs with inept co-workers. RPE contracts also are less desirable when the output of co-workers is expensive to measure or in the presence of production externalities, as in the case of team production. The purpose of this paper is to review the benefits and costs of RPE and to test for the presence of RPE in one occupation where the benefits plausibly exceed the costs: chief executive officers (CEOs). In contrast to previous research, our empirical evidence strongly supports the RPE hypothesis-CEO pay revisions and retention probabilities are positively and significantly related to firm performance, but are negatively and significantly related to industry and market performance, ceteris paribus. Our results also suggest that CEO performance is more likely to be evaluated relative to aggregate market movements than relative to industry movements.
Download or read book Relative Performance Evaluation in CEO Compensation written by David De Angelis and published by . This book was released on 2019 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: Relative performance evaluation (RPE) in CEO compensation can be used as a commitment device to pay CEOs for their revealed relative talent. We find evidence consistent with the talent-retention hypothesis, using two different approaches. First, we examine the RPE terms in compensation contracts and document features that are consistent with retention motives. Second, using a novel empirical specification for detecting RPE, we find RPE is less prevalent when CEO talent is less transferrable: among specialist CEOs, founder CEOs, and retirement-age CEOs, as well as in industries and states where the market for CEO talent is more restrictive.
Download or read book Relative Performance Evaluation for Chief Executive Officers written by Kevin J. Murphy and published by . This book was released on 1991 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Measured individual performance often depends on random factors which also affect the performances of other workers in the same firm, industry, or market. In these cases, relative performance evaluation (RPE) can provide incentives while partially insulating workers from the common uncertainty. Basing pay on relative performance, however, generates incentives to sabotage the measured performance of co-workers, to collude with co-workers and shirk, and to apply for jobs with inept co-workers. RPE contracts also are less desirable when the output of co-workers is expensive to measure or in the presence of production externalities, as in the case of team production. The purpose of this paper is to review the benefits and costs of RPE and to test for the presence of RPE in one occupation where the benefits plausibly exceed the costs: chief executive officers (CEOs). In contrast to previous research, our empirical evidence strongly supports the RPE hypothesis-CEO pay revisions and retention probabilities are positively and significantly related to firm performance, but are negatively and significantly related to industry and market performance, ceteris paribus. Our results also suggest that CEO performance is more likely to be evaluated relative to aggregate market movements than relative to industry movements.
Download or read book CEO Turnover and Relative Performance Evaluation written by Dirk Jenter and published by . This book was released on 2014 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that CEOs are fired after bad firm performance caused by factors beyond their control. Standard economic theory predicts that corporate boards filter out exogenous industry and market shocks from firm performance before deciding on CEO retention. Using a hand-collected sample of 3,365 CEO turnovers from 1993 to 2009, we document that CEOs are significantly more likely to be dismissed from their jobs after bad industry and, to a lesser extent, after bad market performance. A decline in industry performance from the 90th to the 10th percentile doubles the probability of a forced CEO turnover.
Download or read book Relative performance evaluation for chief executive officers written by Robert Gibbons and published by . This book was released on 1989 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Relative Performance Evaluation for Chief Executive Officers written by and published by . This book was released on 1989 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Robust Models of CEO Turnover written by C. Edward Fee and published by . This book was released on 2017 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the robustness of empirical models and findings concerning CEO turnover. We show that the sensitivity of turnover to abnormal firm performance is an extremely robust result. In contrast, evidence indicating a relation between turnover and industry performance is both weak and fragile. We show that small changes in turnover modeling choices can affect inferences in a large way. Our evidence casts substantial doubt on the hypothesis that there is a large industry performance component to turnover decisions. We use our findings to offer some general prescriptions for checking robustness results in CEO turnover research.
Download or read book CEO Pay and Firm Performance written by Paul L. Joskow and published by . This book was released on 1994 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the dynamic structure of the pay-for- performance relationship in CEO compensation and quantifies the effect of introducing a more complex model of firm financial performance on the estimated performance sensitivity of executive pay. The results suggest that current compensation responds to past performance outcomes, but that the effect decays considerably within two years. This contrasts sharply with models of infinitely persistent performance effects implicitly assumed in much of the empirical compensation literature. We find that both accounting and market performance measures influence compensation and that the salary and bonus component of pay as well as total compensation have become more sensitive to firm financial performance over the past two decades. There is no evidence that boards fail to penalize CEOs for poor financial performance or reward them disproportionately well for good performance. Finally, the data suggest that boards may discount extreme performance outcomes -both high and low - relative to performance that lies within some `normal' band in setting compensation.
Download or read book An Empirical Investigation of the Relative Performance Evaluation of Corporate Executives written by Rick Antle and published by . This book was released on 1986 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Executive Compensation and Shareholder Value written by Jennifer Carpenter and published by Springer Science & Business Media. This book was released on 2013-04-17 with total page 159 pages. Available in PDF, EPUB and Kindle. Book excerpt: Executive compensation has gained widespread public attention in recent years, with the pay of top U.S. executives reaching unprecedented levels compared either with past levels, with the remuneration of top executives in other countries, or with the wages and salaries of typical employees. The extraordinary levels of executive compensation have been achieved at a time when U.S. public companies have realized substantial gains in stock market value. Many have cited this as evidence that U.S. executive compensation works well, rewarding managers who make difficult decisions that lead to higher shareholder values, while others have argued that the overly generous salaries and benefits bear little relation to company performance. Recent conceptual and empirical research permits for the first time a truly rigorous debate on these and related issues, which is the subject of this volume.
Download or read book Essays in Relative Performance Evaluation written by Ana Maria Baptista dos Santos Albuquerque and published by . This book was released on 2006 with total page 348 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Pay Without Performance written by Lucian A. Bebchuk and published by Harvard University Press. This book was released on 2004 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Download or read book Passing the Baton written by Richard F. Vancil and published by Harvard Business Review Press. This book was released on 1987 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Executive compensation strategic competition and relative performance evaluation written by Rajesh Aggarwal and published by . This book was released on 1996 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Explaining Executive Pay written by Lukas Hengartner and published by Springer Science & Business Media. This book was released on 2007-12-31 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: Lukas Hengartner shows that both firm complexity and managerial power are associated with higher pay levels. This suggests that top managers are paid for the complexity of their job and that more powerful top managers receive pay in excess of the level that would be optimal for shareholders.
