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Onwards and Upwards: why companies change their executive remuneration schemes, and why this leads to increases in pay

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  • Ruth Bender

Abstract

This paper reports interview-based research examining reasons for the continued increase in executive directors' remuneration in large UK companies. This issue has not specifically been addressed by previous studies, which have focused on the level of the increases, rather than their underlying explanations. Reasons given for making changes included: increases due to being below-market; changing performance-related schemes that did not pay out or paid less than expected; changes in the company's culture or strategy; changes to senior personnel; and compliance with good practice in human resource management and in corporate governance. The results are analysed through two theoretical lenses. Agency theory provides an explanation of the structure of the contracts; expectancy theory suggests why schemes might be changed to motivate the executives. Copyright (c) 2007 The Author; Journal compilation (c) 2007 Blackwell Publishing Ltd.

Suggested Citation

  • Ruth Bender, 2007. "Onwards and Upwards: why companies change their executive remuneration schemes, and why this leads to increases in pay," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(5), pages 709-723, September.
  • Handle: RePEc:bla:corgov:v:15:y:2007:i:5:p:709-723
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    References listed on IDEAS

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    1. Jeff Coulton & Stephen Taylor, 2004. "Directors' Duties and Corporate Governance: Have We Gone Too Far?," Australian Accounting Review, CPA Australia, vol. 14(32), pages 17-24, March.
    2. Gerald T. Garvey & Todd T. Milbourn, 2003. "Asymmetric Benchmarking in Compensation: Executives are Paid for (Good) Luck But Not Punished for Bad," Claremont Colleges Working Papers 2003-01, Claremont Colleges.
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    Cited by:

    1. Brian G. M. Main & Calvin Jackson & John Pymm & Vicky Wright, 2008. "The Remuneration Committee and Strategic Human Resource Management," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(3), pages 225-238, May.

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