Advanced Search
MyIDEAS: Login to save this paper or follow this series

Executive Pay and Performance in the UK 1994-2002

Contents:

Author Info

  • Paul Gregg
  • Sarah Jewell
  • Ian Tonks

    ()

Abstract

This paper examines the relationship between executive cash compensation and company performance for a sample of large UK companies over the period 1994-2002. This relationship is examined against a background of a series of reports into corporate governance mechanisms in UK companies. We show that base pay compensation of UK executives has increased substantially over this period, and we provide evidence on the movement in the pay-performance sensitivity over time. We identify an asymmetric relationship between pay and performance: in years and for companies in which stock returns are relatively high, pay-performance elasticities are high, but we find that executive pay is less sensitive to performance in those cases when stock returns are low. This suggests that overall there is little relationship between pay and performance. We also explore the heterogeneity of the pay-performance relationship across firms, and find that board structure, firm size, industry and firm risk are all significant determinants of executive compensation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp122.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 05/122.

as in new window
Length: 40 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:bri:cmpowp:05/122

Contact details of provider:
Postal: 2 Priory Road, Bristol, BS8 1TX
Phone: 0117 33 10799
Fax: 0117 33 10705
Email:
Web page: http://www.bris.ac.uk/cmpo/
More information through EDIRC

Related research

Keywords: Executive compensation; pay and performance;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  2. Rosen, S., 1990. "Contracts and Market for Executives," University of Chicago - Economics Research Center, Chicago - Economics Research Center 90-12, Chicago - Economics Research Center.
  3. Cosh, Andrew, 1975. "The Remuneration of Chief Executives in the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 85(337), pages 75-94, March.
  4. Conyon, Martin J & Nicolitsas, Daphne, 1998. " Does the Market for Top Executives Work? CEO Pay and Turnover in Small U.K. Companies," Small Business Economics, Springer, Springer, vol. 11(2), pages 145-54, September.
  5. Thompson, Steve & Sourafel Girma & Peter W Wright, 2003. "Corporate Governance Reforms and Executive Compensation Determination: Evidence from the UK," Royal Economic Society Annual Conference 2003, Royal Economic Society 202, Royal Economic Society.
  6. Brian J. Hall & Kevin J. Murphy, 2000. "Optimal Exercise Prices for Executive Stock Options," NBER Working Papers 7548, National Bureau of Economic Research, Inc.
  7. Phillip McKnight & Cyril Tomkins, 1999. "Top Executive Pay in the United Kingdom: A Corporate Governance Dilemma," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 6(2), pages 223-243.
  8. Rajesh Aggarwal & Andrew A. Samwick, 1998. "The Other Side of the Tradeoff: The Impact of Risk on Executive Compensation," NBER Working Papers 6634, National Bureau of Economic Research, Inc.
  9. Robert Gibbons & Kevin J. Murphy, 1991. "Relative Performance Evaluation for Chief Executive Officers," NBER Working Papers 2944, National Bureau of Economic Research, Inc.
  10. Conyon, M.J. & Leech, D., 1993. "Top Pay, Company Performance and Corporate Governance," The Warwick Economics Research Paper Series (TWERPS) 410, University of Warwick, Department of Economics.
  11. Groot, Wim & Maassen van den Brink, Henriette, 2000. "Overeducation in the labor market: a meta-analysis," Economics of Education Review, Elsevier, Elsevier, vol. 19(2), pages 149-158, April.
  12. Brian J. Hall & Jeffrey B. Liebman, 1997. "Are CEOs Really Paid Like Bureaucrats?," NBER Working Papers 6213, National Bureau of Economic Research, Inc.
  13. John M. Abowd, 1990. "Does performance-based managerial compensation affect corporate performance?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 52-73, February.
  14. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers, Rochester, Business - Managerial Economics Research Center 88-04, Rochester, Business - Managerial Economics Research Center.
  15. Main, Brian G M & Bruce, Alistair & Buck, Trevor, 1996. "Total Board Remuneration and Company Performance," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(439), pages 1627-44, November.
  16. Marianne Bertrand & Sendhil Mullainathan, 2001. "Are Ceos Rewarded For Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(3), pages 901-932, August.
  17. Sherwin Rosen, 1990. "Contracts and the Market for Executives," NBER Working Papers 3542, National Bureau of Economic Research, Inc.
  18. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  19. Conyon, Martin & Gregg, Paul & Machin, Stephen, 1995. "Taking Care of Business, Executive Compensation in the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(430), pages 704-14, May.
  20. Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 7(1-3), pages 11-42, April.
  21. Steven Young, 2000. "The Increasing Use of Non-Executive Directors: Its Impact on UK Board Structure and Governance Arrangements," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 27(9&10), pages 1311-1342.
  22. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
  23. Conyon, Martin J., 1997. "Corporate governance and executive compensation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 15(4), pages 493-509, July.
  24. Gerald Garvey & Todd Milbourn, 2003. "Incentive Compensation When Executives Can Hedge the Market: Evidence of Relative Performance Evaluation in the Cross Section," Journal of Finance, American Finance Association, American Finance Association, vol. 58(4), pages 1557-1582, 08.
  25. Conyon, Martin J & Murphy, Kevin J, 2000. "The Prince and the Pauper? CEO Pay in the United States and United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(467), pages F640-71, November.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bri:cmpowp:05/122. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.