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Top Pay, Company Performance and Corporate Governance

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  • Conyon, M.J.
  • Leech, D.

Abstract

This paper examines the relationship between top director pay, company performance and corporate governance in a sample of 294 U.K. companies between 1983 and 1986. The reported econometric results reveal that although a statistically significant relationship can be established between the growth in highest paid director salary and shareholder wealth, the estimated elasticity is quantitatively very small. In line with other research, company sales is important in explaining top pay. The paper shows that measures of corporate governance play no role in shaping the growth in top directors pay, although there is some evidence that the level of pay is lower in ownership controlled firms or where shareholder concentration is high. On the other hand where the primary shareholders are insurance companies and pension funds, or where the company separates the role of CEO and chairman there is no statistical effect on top pay. Copyright 1994 by Blackwell Publishing Ltd
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Suggested Citation

  • 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.
  • Handle: RePEc:wrk:warwec:410
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    Cited by:

    1. Ali Dardour, 2008. "Les déterminants de la rémunération des dirigeants des sociétés cotées en France," Post-Print halshs-00522506, HAL.
    2. Yishay Yafeh & Oved Yosha, 2003. "Large Shareholders and Banks: Who Monitors and How?," Economic Journal, Royal Economic Society, vol. 113(484), pages 128-146, January.
    3. Xunan Feng & Anders C. Johansson, 2017. "CEO Incentives in Chinese State-Controlled Firms," Economic Development and Cultural Change, University of Chicago Press, vol. 65(2), pages 223-264.
    4. Martin J. Conyon, 1995. "Directors' Pay in the Privatized Utilities," British Journal of Industrial Relations, London School of Economics, vol. 33(2), pages 159-171, June.
    5. Maria-Teresa Marchica & Roberto Mura, 2005. "Direct and Ultimate Ownership Structures in the UK: an intertemporal perspective over the last decade," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(1), pages 26-45, January.
    6. Ming-Yuan Chen, 2010. "The Components Of Managerial Pay Adjustments And Their Impact On Firm Performance," Manchester School, University of Manchester, vol. 78(6), pages 582-608, December.
    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, vol. 6(2), pages 223-243.
    8. Conyon, Martin J., 1997. "Corporate governance and executive compensation," International Journal of Industrial Organization, Elsevier, vol. 15(4), pages 493-509, July.
    9. Ho, Carol-Anne & Williams, S. Mitchell, 2003. "International comparative analysis of the association between board structure and the efficiency of value added by a firm from its physical capital and intellectual capital resources," The International Journal of Accounting, Elsevier, vol. 38(4), pages 465-491.
    10. W.N.W Azman‐Saini & Peter Smith, 2011. "Finance And Growth: New Evidence On The Role Of Insurance," South African Journal of Economics, Economic Society of South Africa, vol. 79(2), pages 111-127, June.
    11. Girma, Sourafel & Steve Thompson & Peter Wright, 2002. "Merger Activity and Executive Pay," Royal Economic Society Annual Conference 2002 87, Royal Economic Society.
    12. Dong, Min & Ozkan, Aydin, 2008. "Institutional investors and director pay: An empirical study of UK companies," Journal of Multinational Financial Management, Elsevier, vol. 18(1), pages 16-29, February.
    13. Theeravanich, Amnaj, 2013. "Director compensation in emerging markets: A case study of Thailand," Journal of Economics and Business, Elsevier, vol. 70(C), pages 71-91.
    14. M. Ali Choudhary & J. Michael Orszag, 2003. "Are Performance Conditions On Executive Options Driven By Fundamentals?," School of Economics Discussion Papers 1103, School of Economics, University of Surrey.
    15. Paul Gregg & Sarah Jewell & Ian Tonks, 2005. "Executive Pay and Performance in the UK 1994-2002," The Centre for Market and Public Organisation 05/122, Department of Economics, University of Bristol, UK.
    16. Johnston, James, 2007. "Independent Directors, Executive Remuneration and the Governance of the Corporation: Some Empirical Evidence from the United Kingdom," Review of Applied Economics, Review of Applied Economics, vol. 3(1-2).
    17. Phillip J. McKnight, 1996. "An Explanation of Top Executive Pay: A UK Study," British Journal of Industrial Relations, London School of Economics, vol. 34(4), pages 557-566, December.
    18. Mäkinen, Mikko, . "Essays on Stock Option Schemes and CEO Compensation," ETLA A, The Research Institute of the Finnish Economy, number 42.
    19. Cosh, Andy & Hughes, Alan, 1997. "Executive remuneration, executive dismissal and institutional shareholdings," International Journal of Industrial Organization, Elsevier, vol. 15(4), pages 469-492, July.
    20. Rafel Crespi-Cladera & Carles Gispert & Luc Renneboog, 2001. "Verringern Management-Entlohnungskosten die Agency-Kosten?: Empirische Evidenz von netzwerkorientierten und marktorientierten Unternehmenskontrollsystemen," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(2), pages 234-246.
    21. Firth, M. & Tam, M. & Tang, M., 1999. "The determinants of top management pay," Omega, Elsevier, vol. 27(6), pages 617-635, December.
    22. I Jones & M.G Pollitt, 2001. "Who Influences Debates in Business Ethics? An Investigation into the Development of Corporate Governance in the UK since 1990," Working Papers wp221, Centre for Business Research, University of Cambridge.
    23. Martin J. Conyon, 1994. "Corporate Governance Changes in UK Companies Between 1988 and 1993," Corporate Governance: An International Review, Wiley Blackwell, vol. 2(2), pages 87-100, April.

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    Keywords

    economic analysis ; economic models;

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