Australian chief executive officer remuneration: pay and performance

International studies document strong evidence that chief executive officer (CEO) remuneration is positively correlated with corporate performance. Prior Australian studies, however, find no positive link between CEO pay and market performance. In the present paper we re‐examine the association between Australian CEO remuneration and firm performance using standard empirical models from the international literature. We find that in every respect the Australian evidence is consistent with international findings for firms of the USA, UK and Canada. In particular, we document CEO pay–performance association as positive and statistically significant.     

Earnings management following chief executive officer changes: the effect of contemporaneous chairperson and chief financial officer appointments

Using a sample of listed Australian firms from 1999 to 2007, we examine the relationship between discretionary accruals and concurrent senior management appointments. Employing panel data regression models and focusing on a measure of discretionary accruals that excludes the effect of transparent write‐downs such as restructuring charges, we find that chief executive officer (CEO) appointments, as a general phenomenon, are not significantly associated with opaque earnings management in the year of appointment or the following year. However, we find that CEO changes accompanied by a concurrent change in board chairperson are associated with significant income‐decreasing earnings management in the year of appointment. We detect no significant relationship between contemporaneous CEO and chief financial officer changes and discretionary accruals. We find no evidence of earnings management in the first compete financial period following CEO appointment, regardless of whether or not concurrent Chair or chief financial officer appointments occurred.     

Generalists versus specialists: Lifetime work experience and chief executive officer pay

We show that pay is higher for chief executive officers (CEOs) with general managerial skills gathered during lifetime work experience. We use CEOs' résumés of Standard and Poor's 1,500 firms from 1993 through 2007 to construct an index of general skills that are transferable across firms and industries. We estimate an annual pay premium for generalist CEOs (those with an index value above the median) of 19% relative to specialist CEOs, which represents nearly a million dollars per year. This relation is robust to the inclusion of firm- and CEO-level controls, including fixed effects. CEO pay increases the most when firms externally hire a new CEO and switch from a specialist to a generalist CEO. Furthermore, the pay premium is higher when CEOs are hired to perform complex tasks such as restructurings and acquisitions. Our findings provide direct evidence of the increased importance of general managerial skills over firm-specific human capital in the market for CEOs in the last decades.     

Corporate governance and chief executive officer dismissal following poor performance: Australian evidence

This paper investigates the association between corporate performance and the probability of chief executive officer (CEO) dismissal for large corporations in Australia. Consistent with prior US and UK studies, corporate performance is negatively related to the probability of CEO dismissal, using both accounting and market‐based performance measures. This paper also investigates whether key corporate governance characteristics affect the likelihood of CEO dismissal, by examining their effect on the strength of the negative association between corporate performance and CEO dismissal. The only significant variable is size of the board. Although its effect is opposite to that hypothesized, this paper provides a plausible explanation. Overall, the results are consistent with shareholder wealth considerations dominating board behaviour in Australia.     

The implied cost of equity capital,corporate investment and chief executive officer turnover

This study investigates how the cost of equity capital, along with corporate investment, affects chief executive officer (CEO) turnover decisions. We hypothesize that the cost of equity conveys information about firm performance uncertainty that is informative of CEO talent. Consistently, our empirical results show that the likelihood of CEO turnover is positively associated with the implied cost of equity, after controlling for earnings and stock performance measures and risk factors. Additional analysis of reverse causality supports the causal effect of the high cost of equity on CEO dismissals. We also find that the positive association is more pronounced for firms that are more likely to suffer from underinvestment problems. These results suggest that the cost of equity plays a more important role in assessing CEO performance when the firm needs more external equity capital to pursue investment opportunities.     

The chief strategy officer

They're nominally and ultimately responsible for strategy, but today's CEOs have less and less time to devote to it. As a result, CEOs are appointing "chief strategy officers"--executives specifically tasked with creating, communicating, executing, and sustaining a company's strategic initiatives. In this article, three authors from Accenture share the results of their research on this emerging organizational role. The typical CSO or top strategy executive is not a pure strategist, conducting long-range planning in relative isolation. Most CSOs consider themselves doers first, with the mandate, credentials, and desire to act as well as advise. They are seasoned executives with a strong strategy orientation who have usually worn many operations hats before taking on the role. Strategy executives are charged with three critical jobs that together form the very definition of strategy execution. First, they must clarify the company's strategy for themselves and for every business unit and function, ensuring that all employees understand the details of the strategic plan and how their work connects to corporate goals. Second, CSOs must drive immediate change. The focus of the job almost always quickly evolves from creating shared alignment around a vision to riding herd on the ensuing change effort. Finally, a CSO must drive decision making that sustains organizational change. He or she must be that person who, in the CEO's stead, can walk into any office and test whether the decisions being made are aligned with the strategy and are creating the desired results. When decisions below the executive suite aren't being made in accordance with strategy, much of the CSO's job involves learning why and quickly determining whether to stay the course or change tack.     

Compensation committee governance quality,chief executive officer stock option grants,and future firm performance

This paper examines whether the relationship between future firm performance and chief executive officer (CEO) stock option grants is affected by the quality of the compensation committee. Compensation committee quality is measured using six committee characteristics – the proportion of directors appointed during the tenure of the incumbent CEO, the proportion of directors with at least ten years’ board service, the proportion of directors who are CEOs at other companies, the aggregate shareholding of directors on the compensation committee, the proportion of directors with three or more additional board seats, and compensation committee size. We find that future firm performance is more positively associated with stock option grants as compensation committee quality increases.     

Chief executive officer trustworthiness and green innovation

This study examines the influence of chief executive officer (CEO) trustworthiness on green innovation. We argue that firms led by trustworthy CEOs have a higher likelihood of adopting socially acceptable policies in response to environmental issues. Drawing on social norms perspective, we find that CEO trustworthiness is positively associated with green innovation using a sample of Chinese manufacturing firms from 2003 to 2018. Findings suggest that hiring trustworthy CEOs allows firms to cope with environmental issues.     

A letter to the chief executive

Beyond the recent accounting scandals, something is wrong with the way most companies are managed today. That's the message of this fictional letter from a board member to a CEO, written by Joseph Fuller, CEO of strategy consulting firm the Monitor Group. The letter highlights the challenges and complexities of running a business in today's uncertain environment. And while it avoids the facile bashing of U.S. executives so common these days, the missive nonetheless casts a harsh light on the flaws that have recently been exposed in the American management model. The letter addresses a single CEO and company, yet it is intended to speak to executives and boards everywhere: "It wasn't the recession that caused us to make three acquisitions in two years at very, very high prices; the need to fuel [unreasonable] growth did. Nor was it the recession that caused us to expand our capacity in anticipation of gaining market share; rather, it was our own overly optimistic sales forecasts that led us to that decision. Where did those forecasts originate? From line managers trying to fulfill profit goals that we created after meeting with the analysts. "The root cause of many of the problems that became apparent in the last 24 months lies not with the economy, not with September 11, and not with the dot-com bubble. Rather, it lies with that willingness to be led by outside forces-indeed, our own lack of conviction about setting a course." Restoring sound, strategic decision making--thinking that looks beyond tomorrow's analyst reports--will go a long way toward keeping those outside forces at bay, according to Fuller.     

Charitable inclination and the chief executive officer's pay package

Using chief executive officers’ (CEOs’) lifetime nonemployment experience in prominent charitable organizations to create a proxy for CEO charitable inclination, I find that charitably inclined CEOs receive a significant pay premium. The pay premium sensitivity to CEO charitable inclination is particularly pronounced for male, external, and specialist CEOs who are employed at firms that are undiversified, larger, less debt reliant, poor performing, facing high product‐market competition, and that keep nonmanipulative financial statements and demonstrate high inclination to social responsibility in the area of diversity, employee relations, and internal governance. This research contributes to the broader debate on labor market pricing of CEO characteristics.     

The determinants of director remuneration,executive tenure and individual executive disclosure in North African IPO firms

This paper examines the impact of board governance mechanisms, namely board size, independence ratio, opacity of earnings disclosure, and ratio of genuinely independent nonexecutive directors to total board size on director remuneration, executive tenure and likelihood of individual executive salary disclosure in a unique and comprehensive sample of 69 North African IPO firms. I find evidence of the enhanced governance role of true independent nonexecutives in family as opposed to non-family firms in improving disclosure of individual salaries and moderating lengths of executive tenure. However while their role is only significant in the context of family firms the evidence suggests that their presence is associated with higher levels of remuneration. The evidence also ascribes a greater role for business angel as opposed to more formal private equity financing which is more applicable within the highly social networked economy of the Maghreb region.     

Second in command: the misunderstood role of the chief operating officer

Asking the question,"What makes a great COO?" is akin to asking "What makes a great candidate for U.S. vice president?" It all depends on the first name on the ticket--the CEO. New research sheds light on this most contingent, and most mysterious, of C-suite jobs. After in-depth conversations with dozens of executives who have held the position and with CEOs who have worked with COOs, the authors have concluded that different views of the COO role arise from the different motives behind creating the position in the first place. There are seven basic reasons why companies decide to hire a COO: to implement the CEO's strategy; to lead a particular initiative, such as a turnaround; to mentor a young, inexperienced CEO; to complement the strengths or make up for the weaknesses of the CEO; to provide a partner to the CEO; to test out a possible successor; or to stave off the defection of a highly valuable executive, particularly to a rival. This tremendous variation implies that there is no standard set of great COO attributes, which makes finding suitable candidates difficult for companies and recruiters alike. Still, certain common success factors came up consistently in the interviews, the most important being building a high level of trust between CEO and COO. Trust comes from meeting obligations on both sides: The COO must truly support the CEO's vision; keep ego in check; and exhibit strong execution, coaching, and coordination skills. The CEO must communicate faithfully, grant real authority and decision rights, and not stymie the COO's career. It's surprising that COOs are not more common. They would be, the authors contend, if there were less confusion surrounding the role. As we continue to demystify that role, more companies will benefit from more effective leadership.     

The effectiveness of chief financial officer board membership in improving corporate investment efficiency

The key roles of the Chief Financial Officer (CFO) in firm operating performance, corporate strategic choices, and corporate governance have been increasingly emphasized in recent decades. In this study, we empirically investigate the relation between CFO board membership and corporate investment efficiency to determine whether CFO presence on the board reduces firms’ propensity to over- or underinvest. We find that CFO board membership is significantly associated with a decreased level of corporate over- and underinvestment. Further, the positive effects of CFO board membership on corporate investment efficiency are greater for firms with greater information asymmetries. Last but not least, we find that the improved investment efficiency experienced by firms with CFOs on their boards has a positive effect on the firms’ future performance. Overall, we find that CFO board membership is associated with improved investment efficiency and firms’ future profitability. By documenting the real business impact of CFO board membership on investment efficiency and firms’ future performance, we add bricks to the literature on board composition and how it influences firms’ strategic choices and performance. Our findings suggest that having CFOs on boards could benefit firms’ investment practices, which directly relate to corporate strategic performance.

     

Chief executive officer remuneration disclosure quality: corporate responses to an evolving disclosure environment

We examine chief executive officer remuneration disclosure in Australia from 1998 to 2004. Disclosure was first required by the Company Law Review Act 1998 (CLRA98). Despite CLRA98's clear intentions, firms generally failed to comply until the requirements were formalized by Director and Executive Disclosures by Disclosing Entities (AASB1046), issued in 2004. For a sample of 124 firms, we find significant improvements in disclosure concurrent both with CLRA98 and AASB1046. We also find firm size, corporate governance, auditor quality, cross‐listing status and public scrutiny to be significant explanations of disclosure. Our results indicate that high quality disclosures will only come about through detailed, black letter requirements and that principle‐based legislation involving interpretative discretion is unlikely to produce the desired level of disclosure.     

When is Goodwill not Goodwill? The Accounting and Taxation Implications

Courts have encountered perplexing questions about the definition and valuation of goodwill which have significant tax implications. This paper compares the treatment of goodwill from accounting and taxation perspectives. It examines two recent Australian court decisions concerned with the concept of goodwill and finds there are still several areas of contention that both cases failed to settle.     

商誉与企业风险承担

商誉泡沫已成为资本市场健康发展的重要隐患,然而关于商誉与企业风险承担之间的关系却较少受到经验文献的关注。本文以中国资本市场2007-2014年间发生商誉事项的A股上市公司为研究样本,分析商誉影响企业风险承担的内在机理并加以实证检验。结果显示,商誉已成为企业承担较高水平风险的重要信号,公司拥有的商誉资产越多,其承担的风险水平相应越高。进一步的考察发现,伴随减值准备计提比例和企业成长性的提升,商誉对企业风险承担的影响显著增强。本文不仅丰富了商誉的经济后果文献,而且可为准则制定机构修订和完善企业会计准则、优化投资者投资决策提供理论参考。     

美国企业财产征用过程中的商誉损失及其评估

财产所有者在其财产被政府征用后可以就被占财产的价值取得补偿,目前我国一般只是对其有形资产的损失进行补偿.实际上,这种损失既可能体现为有形财产的损失,也可能体现为无形资产,主要是商誉的损失.本文简要介绍了国外商誉损失及其评估的有关情况.普通评估方法是比较征用前的商誉价值与征用后的商誉价值的差异.企业价值评估师可以使用现代经济和金融理论估算企业商誉损失.文中还举出国外的几个案例阐述了如何使用该理论来评估商誉的损失.