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CEO Age and Top Executive Pay: A UK Empirical Study

Author

Listed:
  • Phillip McKnight
  • Cyril Tomkins
  • Charlie Weir
  • David Hobson

Abstract

This study examines the implications that CEO age has onexecutive pay regarding data collected in a UK setting. Whereprior research has typically focused on total pay (salary plusbonus), this study offers a more complete conceptual model bysplitting pay into salary, annual bonus, and share options. Indoing so, we found that the relationship between CEO salaries andage are significantly related with this association weakeningover time. Another interesting finding not captured by priorresearch was that the relationship between CEO age and bonusappears to be non-linear in nature. Figures 2 which depicts thisnon-linear function suggest at about age 53, the proportion ofbonus as a percentage of salary begins to decrease at anincreasing rate. As a whole, these findings suggest corporate paycommittees should consider family and the financial circumstancesof the executive when designing remuneration schemes. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Phillip McKnight & Cyril Tomkins & Charlie Weir & David Hobson, 2000. "CEO Age and Top Executive Pay: A UK Empirical Study," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 4(3), pages 173-187, September.
    • Handle: RePEc:kap:jmgtgv:v:4:y:2000:i:3:p:173-187
    DOI: 10.1023/A:1026755428942
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    References listed on IDEAS

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    1. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-620, September.
    2. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    3. Mehran, Hamid, 1992. "Executive Incentive Plans, Corporate Control, and Capital Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(4), pages 539-560, December.
    4. 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, vol. 6(2), pages 223-243.
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    Citations

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    Cited by:

    1. Schmid, Stefan & Altfeld, Frederic & Dauth, Tobias, 2018. "Americanization as a driver of CEO pay in Europe: The moderating role of CEO power," Journal of World Business, Elsevier, vol. 53(4), pages 433-451.
    2. Gan, Huiqi & Park, Myung S. & Suh, SangHyun, 2020. "Non-financial performance measures, CEO compensation, and firms’ future value," Journal of Business Research, Elsevier, vol. 110(C), pages 213-227.
    3. Wallace Davidson & Biao Xie & Weihong Xu & Yixi Ning, 2007. "The influence of executive age, career horizon and incentives on pre-turnover earnings management," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 11(1), pages 45-60, March.
    4. Hristos Doucouliagos & Janto Haman & T.D. Stanley, 2012. "Pay for Performance and Corporate Governance Reform," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(3), pages 670-703, July.
    5. Kathy Fogel & Liping Ma & Randall Morck, 2021. "Powerful independent directors," Financial Management, Financial Management Association International, vol. 50(4), pages 935-983, December.
    6. Essam Joura & Qin Xiao & Subhan Ullah, 2023. "The moderating effects of CEO power and personal traits on say‐on‐pay effectiveness: Insights from the Anglo‐Saxon economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4055-4078, October.
    7. Lars Oxelheim & Kevin Clarkson, 2015. "Cronyism and the Determinants of Chairman Compensation," Journal of Business Ethics, Springer, vol. 131(1), pages 69-87, September.
    8. Stefan Schmid & Sebastian Baldermann, 2021. "CEOs’ International Work Experience and Compensation," Management International Review, Springer, vol. 61(3), pages 313-364, June.

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