Changing board behaviour: The role of the ‘Two Strikes’ rule in improving the efficacy of Australian Say-on-Pay

This article analyses whether the transition from the 2004 CLERP 9 advisory Say-on-Pay regime to the ‘Two Strikes’ rule in 2012 influenced CEO pay in Australian firms. Analysing a panel of 2,074 firm-years (2005–2015), we find that (i) CEO pay is a positive predictor of shareholder dissent; (ii) firm performance has a reducing effect on shareholder dissent; (iii) excessive shareholder dissent moderated CEO pay under the ‘Two Strikes’ rule relative to the CLERP 9 regime, and (iv) the market responded favourably to the introduction of the ‘Two Strikes’ rule and negatively to ‘strike’ instances after its introduction.     

The effect of supplier industry competition on pay-for-performance incentive intensity

We examine how supplier industry competition affects CEO incentive intensity in procuring firms. Using Bureau of Economic Analysis data to compute a weighted supplier industry competition measure, we predict and find that higher supplier competition is associated with stronger CEO pay-for-performance incentive intensity. This effect is incremental to that of the firm's own industry competition previously documented and is robust to alternative measures of supplier competition and to exogenous shocks to competition. Importantly, we show that performance risk and product margin act as mediating variables in the relation between supplier competition and CEO incentive intensity providing support for the theory underpinning our finding. We document that CEO compensation contracts are used as a mechanism to exploit the market dynamics of upstream industries to a firm's benefit. Our findings are economically important as suppliers provide, on average, 45 percent of the value delivered by procuring firms to the market (BEA, 2016).     

Bank executive pay limits and discretionary loan loss provisions: Evidence from China

This paper investigates the impact of bank executive pay limits on discretionary loan loss provisions (DLLPs) in the context of a large emerging economy, such as that of China. We find that a bank executive pay limit primarily aimed at temporarily suspending stock option incentive plans leads to a significant rise in income-decreasing DLLPs, whereas a pay limit implemented to restrict the total emoluments leads to a significant decline in income-increasing DLLPs. Moreover, the degree of the impact of pay limits on bank DLLPs varies with CEOs’ personal characteristics and bank executive perquisites.     

How does legislative behavior change when the country becomes democratic? The case of South Korea

The Political Legislation Cycle theory predicts a peak of legislative production in the pre-electoral period, when legislators focus on voters’ welfare to be reelected. This paper verifies the theory on South Korean legislative production (1948–2016); it is the first test of the theory in a country undergoing a process of democratization, thus providing evidence relevant also for the conditional political cycles literature. Two insofar untested hypotheses are verified: 1) peaks of legislative production should increase with the degree of democracy; 2) as the party system and the mechanisms of legislative checks and balances develop, the PLC should become more evident in bills of legislative rather than executive’s initiative. A hurdle model estimated on both laws of parliamentary proposal and of government assignment lends empirical support to both hypotheses, with the noticeable feature that PLC in Korea appear more in the form of an upward trend than of pre-electoral peaks.     

Executive incentives and payout policy: Empirical evidence from Europe

We investigate how corporate payout policy is influenced by executive incentives, i.e. stock and option holdings, stock option deltas and stock-based pay-performance sensitivity for 1,650 publicly listed firms from the UK, Germany, France, Italy, the Netherlands and Spain, over the period from 2002 to 2009. Our results show that executive stock option holdings and stock option deltas are associated with lower dividend payments in our sample of European countries, where we do not observe any presence of dividend protection for executive stock options. We find that this relationship is mainly driven by exercisable stock options and by options that are in the money. Additionally, we observe that executive stock option holdings and stock option deltas have a negative impact on total payout, suggesting that executives do not substitute share repurchases for dividends. Furthermore, the fraction of share repurchases in total payout increases as executive stock option holdings and stock option deltas increase. Finally, our results show that executive share ownership and stock-based pay-performance sensitivity may mitigate agency conflicts by significantly increasing the level of total payout.     

Do aircraft perquisites cause CEOs to withhold bad news?

This paper explores the relation between management forecasts and expensive perquisites. We investigate Yermack's (2006) conjecture that managers withhold bad news in order to receive expensive perquisites. We provide direct evidence supporting Yermack's (2006) conjecture. The frequency and magnitude of bad news release is greater than that of good news after the chief executive officer (CEO) first discloses aircraft perks. In addition, managers with greater numbers of disclosed perks are more inclined to withhold bad news. Additional subsample analyses provide further support for managerial bad news withholding behavior.     

中国的改革红利如何生成——基于利益集团和制度分析的视角

中国改革红利生成与跨越中等收入陷阱的关键就是构建抵御利益集团对经济负面作用的制度体系。建立权力的制约体系并切断权力与利益集团的直接联系，建立公正的政策和制度制定的程序，提高制度质量并保障制度的有效实施是构建抵御利益集团对经济负面作用的制度体系的三大条件。我国释放改革红利的制度空间还很大，这主要表现在以下四个方面：构建有限政府，处理好政府与市场的关系；构建发展型国家，实现从非直接统治型国家向直接统治型国家的转型；完善市场经济体制，防止权贵的市场经济；加快政治体制改革，建立和完善社会主义民主与法治的制度体系。     

Top executive compensation,regional institutions and Chinese OFDI

Integrating agency and institutional theories, this paper examines the impact of top-executive compensation and regional institutions on the outward FDI(OFDI) of a sample of Chinese-listed firms. The results show that top-executive cash pay and equity ownership have a positive association with OFDI. Differing from previous studies focusing on cross-country institutional variances, we take variations in within-country institutions into account and find that regional institutions in terms of product markets, factor markets and legal systems play an important role in OFDI and positively moderate the governance role of managerial equity ownership.     

Ethical choices in the design and administration of executive compensation programs

Within the past few years, executives have come under increased scrutiny and criticism for the levels of compensation they receive. At the same time, corporate practices surrounding the design and review of executive compensation programs have received increased attention. While some recent executive misconduct has involved violations of the law, many academics and other corporate critics view the issues involving executive compensation more from an ethical than a legal perspective. Several dimensions of the executive compensation decision process offer significant opportunities for ethical choices. This article identifies the major components of executive compensation and highlights decision points in the design and administration of each component where ethical issues may arise. Proposals to reduce the potential for ethical misconduct are also offered.     

Top Executive Pay in the United Kingdom: A Corporate Governance Dilemma

This study represents a first attempt in the UK literature to split total pay into salary, annual bonus and share options for the purpose of empirically verifying how each is related to executive performance. As predicted from earlier studies on total pay, salaries were found primarily determined by firm size. Contarary to prior research, however, our findings suggest a pronounced link does exist between performance and pay over both the short- and long-term. This is manifested particularly by the magnitude of the coefficient estimates found between changes in shareholders return and changes in executive share options. This finding strongly suggests that the leverage executives achieve, on average, in their rewards as share prices increase may well be substantial; a finding that has not been captured in previous research on executive remuneration and which is of considerable relevance to the current corporate governance debates.