Download or read book Pension Fund Activism and Pay for Long Term Firm Performance Should Executive Compensation Also be Tied to Employee Well Being to Ensure Sustainability written by Alberto Salazar and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses pension fund activism and the use of executive compensation as a financial incentive to align the behavior of executives with long-term firm performance. It explores the merits of broadening a performance metric that can go beyond traditional shareholder value maximization objectives and integrate employees' interest in the context of liberal market economies. This work argues that active pension funds may adopt a broader view of performance that incorporates employee welfare and thus promote the tying of executive pay to improvements in employees' interests. As shareholder value, firm profitability and executive pay increase, executives should make gradual progress on improving employees' income (e.g. living wages, bonus), productivity and innovation, job security, healthy and safe work environment, equality and pension contributions. This is desirable as it will ensure the long-term sustainability of companies and society at large, which will ultimately secure and maximize the financial returns and non-financial benefits for pension funds' beneficiaries. To that end, pension funds may consider encouraging the use of clawback policies to recoup executive compensation when executives fail to integrate employees' interest into a company's performance metric. While such policies depend on the success of shareholder proposals, pension fund activism seeking to introduce such clawback policies is likely to be more successful with both the recent expansion of directors' fiduciary duties that requires directors to serve the interests of, inter alia, employees and the widely accepted environmental, social and governance (ESG) expectations. This is so because such clawback policy proposals will expose directors to potential liability if they ignore their fiduciary duty towards employees. Ultimately, a clawback policy that incorporates employees' interests into pay for performance will make a significant contribution to long-term firm performance, employee wellbeing and the overall sustainability of society. This paper uses examples from two liberal economies, namely US and Canada, to illustrate the argument.
Download or read book The Duty of Corporate Directors to Tie Executive Compensation to the Long Term Sustainability of the Firm written by Alberto Salazar and published by . This book was released on 2016 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Executive compensation is said to be for performance and, in liberal market economies, the board of directors along with compensation committees have largely been in charge of safeguarding pay for performance. This executive compensation system is legally protected by the business judgment rule (a strong judicial deference) and has recently been supplemented with shareholders' 'say on pay'. Further legal or government intervention has been deemed unnecessary. However, such system has resulted in extremely excessive executive compensation, outrageous pay disparities between executives and workers, poor or short-term performance, recurrent corporate failures and economic recession. This paper explores the need for a stronger legal intervention and argues that directors, in exercising their fiduciary duties, should be legally required to tie executive compensation to the long-term sustainability of the firm that in turn requires the use of executive pay to promote not only sustained growth and long-term shareholder value but also steady improvements in the interests of multiple stakeholders involved in the long-term success of the company, notably employees. It is further argued that, in liberal market economies, employees' 'say on pay' should be considered as it is crucial to allow employees to communicate their interests in order both to incorporate them in the metric of long-term firm sustainability and to counter the likely opposition from short-term oriented shareholders and self-serving directors and officers. This proposal will contribute to avoiding excessive pay and short-termism and to promoting long-term firm performance, which will ultimately protect shareholders and employees' interest in job security, fair and sustainable wages and secured pension while creating more stable economies and avoiding citizens subsidizing periodic corporate failures, excessive executive pay and the wealth accumulation plans of an elite shareholder class. The paper briefly analyzes whether directors have a duty to tie executive pay to long-term performance in the US and Canada and develops the argument building on the lessons that can be drawn from the 2009 German VorstAG (the Act on the Appropriateness of Management Board Remuneration) and the 2015 German Corporate Governance Code.
Download or read book The Future of Public Employee Retirement Systems written by Gary Anderson and published by OUP Oxford. This book was released on 2009-08-13 with total page 366 pages. Available in PDF, EPUB and Kindle. Book excerpt: People covered by public pensions are often the subject of 'pension envy:' that is, their benefits might seem more generous and their contributions lower than those offered by the private sector. Yet this book points out that such judgments are often inaccurate, since civil servants hold jobs with few counterparts in private industry, such as firefighters, police, judges, and teachers. Often these are riskier, dirtier, and demand more loyalty and discretion than would be required of a more mobile labor force in the private sector. The debate challenges traditional ideas about how the public employee labor contract is structured and raises questions about how such employees are attracted to the public sector, retained and motivated on the job, and retired, via an entire compensation package of wages and benefits. Authors explore aspects of these schemes, addressing the cost and valuation debate, along with the political economy of how public pension asset pools are perceived and managed, an increasingly important topic in times of global financial turmoil. The discussion also explores ways that public pensions can be strengthened in the US, Japan, Canada, and Germany. The volume captures a vigorous debate currently underway by academics, financial experts, regulators, and plan sponsors, all seeking to define a new future for public retirement systems. It will be of substantial interest to a wide range of readers, since public sector employees and their representatives will naturally find the comparisons and arguments over valuation of keen interest. Public pension administrators and policymakers seeking an explanation of what makes these plans so costly will gain a new understanding of how the arguments stack up. Private sector employers and plan sponsors can learn much from efforts to reform these retirement systems in states and countries around the world. Finally, investors and the taxpaying public more generally may be at risk to cover these long-term promises, so it behoves them to pay close attention to the financing and investment practices of these plans, along with their valuation. This volume represents an invaluable addition to the Pension Research Council / Oxford University Press series as it includes actuarial, economic, and financial perspectives making it useful for academics, retirement plan administrators, and public employees wishing to understand the challenges facing public pensions.
Download or read book Pension Fund Engagement as a Sustainability Driver written by René Nicolodi and published by Haupt Verlag AG. This book was released on 2007 with total page 506 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Pension Funds and Sustainable Investment written by and published by Oxford University Press. This book was released on 2023-04-15 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is an open access title available under the terms of a CC BY-NC-ND 4.0 International licence. It is free to read at Oxford Scholarship Online and offered as a free PDF download from OUP and selected open access locations. Since its green shoots first emerged around 50 years ago, acceptance of environmental, social, and governance (ESG) considerations in institutional investing-especially at pension funds-has evolved with distinct shifts in investor preferences. This Pension Research Council volume traces these shifts and their implications, leading up to the present day. The book notes that investors have diverse reasons for devoting attention to ESG criteria when deciding where to invest their money. Some had religious motives, such as Quakers who focused on values; this approach can offer some risk mitigation. Nevertheless, studies that look at whether divestment actually changes companies' behaviors show that this rarely occurs. Accordingly, this book offers a variety of distinct viewpoints from a variety of countries, on whether, how, and when ESG criteria should, and should not, drive pension fund investments. The authors also find that policymakers should consider fund consolidation in private sector retirement systems, along with whether service-provider incentives could be better be aligned with sustainability incentives. For instance, boosting transparency in these markets would help generate better-informed policies, while providing beneficiaries with information relevant to their savings choices.
Download or read book Is Say on Pay All About Pay The Impact of Firm Performance written by Jill E. Fisch and published by . This book was released on 2018 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Dodd-Frank Act of 2010 mandated a number of regulatory reforms including a requirement that large U.S. public companies provide their shareholders with the opportunity to cast a non-binding vote on executive compensation. The “say on pay” vote was designed to rein in excessive levels of executive compensation and to encourage boards to adopt compensation structures that tie executive pay more closely to performance. Although the literature is mixed, many studies question whether the statute has had the desired effect. Shareholders at most companies overwhelmingly approve the compensation packages, and pay levels continue to be high.Although a lack of shareholder support for executive compensation is relatively rare, say on pay votes at a number of companies have reflected low levels of shareholder support. A critical question is what factors drive a low say on pay vote. In other words, is say on pay only about pay?In this article, we examine that question by looking at the effect of three factors on voting outcomes -- pay level, sensitivity of pay to performance, and economic performance. Our key finding is the importance of economic performance to say on pay outcomes. Although pay-related variables affect the shareholder vote, even after we control for those variables, an issuer's economic performance has a substantial effect and, perhaps most significantly, shareholders do not appear to care about executive compensation unless an issuer is performing badly. In other words, the say on pay vote is, to a large extent, say on performance.This finding has important implications. First, it raises questions about the federally-mandated shareholder voting right as a tool for concerns about executive compensation. Say on pay has limited effectiveness if it is only being used to discipline managers who are underperforming or alternatively is not a vote on outsize or inordinate pay as it was intended to be. Second, and more important, to the extent that the shareholder vote influences board behavior, granting shareholders another forum for signaling their dissatisfaction with a firm's economic performance may be counterproductive. If investors are signaling concerns over near-term stock performance through their say on pay votes, they may be increasing director incentives to focus on short-term stock performance rather than firm value.
Download or read book No Small Change written by Tessa Hebb and published by Cornell University Press. This book was released on 2008 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt: In No Small Change, Tessa Hebb examines the ability of pension funds, now the largest single driver of financial markets around the world, to use their ownership position to change corporate practices for the sake of the bottom line and, perhaps, change the world for the better in the process. Pension funds are not the new moral conscience of the twenty-first century, but they are significant owners of today's corporations. Because pension funds have to pay out benefits over many decades, they are increasingly concerned about the long-term value of the stocks they hold in their portfolios. Risks posed by climate change can have a huge impact on future returns. To lower the risks associated with an uncertain future, pension funds are engaging corporations and using their influence to raise the environmental, social, and governance (ESG) standards of companies. At its best, Hebb finds, corporate engagement offers a long-term view of value that both promotes higher ESG standards and adds share value, thus providing long-term benefits to future pension beneficiaries. At its worst it may divert the attention of pension fund officials from their primary responsibility of ensuring the retirement benefits of their members. This book weighs the influence of corporate engagement on firms in an effort to see how the potential from this newly emerging force is being realized.
Download or read book Firm Performance written by George T. Milkovich and published by . This book was released on 1989 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Paying for Long term Performance written by and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "Abstract: Firms and regulators around the world are now seeking to ensure that the compensation of public company executives is tied to long-term results to avoid creating incentives for excessive risk-taking. This paper analyzes how this objective can be best achieved. Focusing on equity-based compensation, the primary component of executive pay packages, we identify how such compensation could be best structured to tie remuneration to long-term results rather than short-term gains that might turn out to be illusory. We also analyze how equity compensation could be best designed to prevent the gaming of equity grants at either the front-end or the back-end"--John M. Olin Center for Law, Economics, and Business web site.
Download or read book Public Pensions and the Promise of Shareholder Activism for the Next Frontier of Corporate Governance written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Replacing Executive Equity Compensation written by Nitzan Shilon and published by . This book was released on 2018 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: I argue that executive equity pay in U.S. public firms is undesirable and should be replaced with cash awards for attaining long-term performance criteria.Paying top executives in equity (stock and stock options) is the most significant reform of executive compensation in our generation, universally welcomed not only by firms but also by academics, investors, and policy makers. Yet I argue that equity compensation is undesirable. It provides perverse incentives for managers to destroy shareholder value and behave manipulatively and recklessly. It is also economically wasteful, and its wastefulness, which is exacerbated by agency costs and cognitive biases, significantly contributes to the immense explosion of executive compensation.Instead, I suggest a radical proposal: to replace such equity pay arrangements with carefully designed cash-for-performance schemes in which executives are rewarded in cash for attaining predetermined long-term performance measures. I further recommend that this reform be implemented systemically and that the tax and disclosure rules that are applied to cash incentive remuneration be placed on a level playing field with those that are applied to equity incentive pay. This reform is expected to eliminate the significant costs of equity compensation and make incentive pay more effective, transparent, cheap, and better tied to performance, while retaining the limited incentive benefits generated by current equity compensation arrangements.
Download or read book Hedge Fund Activism written by Alon Brav and published by Now Publishers Inc. This book was released on 2010 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge Fund Activism begins with a brief outline of the research literature and describes datasets on hedge fund activism.
Download or read book Business Sustainability Corporate Governance and Organizational Ethics written by Zabihollah Rezaee and published by John Wiley & Sons. This book was released on 2019-11-06 with total page 971 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive framework for understanding the most important issues in global business This is the e-book version of Business Sustainability, Corporate Governance, and Organizational Ethics. In today's business environment, multinational corporations are under pressure from investors, lawmakers, and regulators to improve their corporate governance, business sustainability, and corporate culture. Business sustainability, corporate governance, and organizational ethics are taking center stage in the global business environment. This long-awaited text covers each of these three important areas in detail, guiding readers to a robust understanding with features including chapter summaries, essential terms, discussion questions, and cases for each topic covered.
Download or read book The CEO Pay Machine written by Steven Clifford and published by Penguin. This book was released on 2017 with total page 289 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The pay gap between chief executive officers of major U.S. firms and their workers is higher than ever before--depending on the method of calculation, CEOs get paid between 300 and 700 times more than the average worker. Such outsized pay is a relatively recent phenomenon, but ... few detractors truly understand the numerous factors that have contributed to the dizzying upward spiral in CEO compensation. Steven Clifford, a former CEO who has also served on many corporate boards, has a name for these procedures and practices: 'The CEO Pay Machine.' [This book] is Clifford's ... explanation of the 'machine'--how it works, how its parts interact, and how every step pushes CEO pay to higher levels"--
Download or read book Business Ethics written by and published by . This book was released on 2003 with total page 456 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Institutional Investors and Corporate Governance written by Theodor Baums and published by Walter de Gruyter. This book was released on 2011-05-02 with total page 725 pages. Available in PDF, EPUB and Kindle. Book excerpt: The volume contains 23 articles by international experts, both scholars and practioners dealing with the development of institutional investors (such as banks, insurances, investment companies, pension funds etc.), their investment and voting policies, the impact on managements of the companies concerned and related issues. The consequences of the international development on capital markets as well as policy implications for the respective national legislations are treated.
Download or read book Corporate Governance Bulletin written by and published by . This book was released on 1993 with total page 930 pages. Available in PDF, EPUB and Kindle. Book excerpt:
