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This study investigates the effect of the characteristics of the board of directors on the accrual and real earnings management level, focusing on the role of the corruption level. The employed dataset consists of 469 European-listed firms from 2011 to 2019. Using a fixed-effect panel data regression model, the results documented that larger boards lack coordination and communication in less corrupt economies, facilitating earnings manipulation through accruals and sales. In highly corrupt countries, oversized boards are associated with increased manipulation of production costs and discretionary expenses. Board meetings are positively related to accrual and sales manipulation in low-corruption countries, and board independence leads to reducing discretionary expenses regardless of corruption level. Board tenure negatively affects accruals and discretionary expenses but tends to increase manipulation through production costs in low-corruption contexts. Additionally, when the CEO serves as the board chairman, it encourages the manipulation of discretionary expenses while reducing real earnings manipulation through sales and production costs. In aggregate, the level of corruption can influence a board's effectiveness under specific conditions. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this study is to investigate how two types of drivers, namely, executive compensation and market competition, can affect hospital quality in the USA. Recently, patients, insurers and regulators have increasingly focused on hospital quality. Understanding the interplay of incentives in this industry is important because in 2019, hospital treatment contributed $1.161bn to health-care costs in the USA. This study answers the call for more studies in the so-called "mixed" industry, where ownership differences can affect organizational objectives and operating constraints. Design/methodology/approach: This study explores the roles of hospital executive compensation and industry competition as determinants of health-care quality. Specifically, the study probes the heterogeneity in the factors that influence quality across hospital types in the USA. Findings: Using California hospital data from 2006 through 2020, the findings show that the effects of compensation and competition on hospital quality differ by ownership type. Executive compensation is positively associated with quality in for-profit hospitals but is not associated with that of nonprofit hospitals, suggesting for-profit hospitals are more likely to use higher levels of compensation to attract managers with higher ability, whereas the utility function for nonprofit managers may be multidimensional. Within the nonprofit hospital group, competition is more positively associated with quality for religious nonprofits relative to secular nonprofits, suggesting that competition provides more monitoring for religious hospitals. Originality/value: Taken together, the findings provide evidence that the drivers of quality vary across hospitals in ways consistent with differences in constraints and objectives across ownership types. The findings are important for regulators seeking to incentivize higher quality. For example, Medicare in the USA has incorporated quality measures into its new hospital reimbursement scheme (value-based purchasing) to incentivize quality. This study proposes that regulators should consider differences across ownership types when evaluating the best ways to incentivize hospital quality. [ABSTRACT FROM AUTHOR]

This study introduces the roles of firms' intertwining and policy variations across firms in the CEO pay–bank performance causal relationships in Nigeria, using the Dumitrescu–Hurlin panel Granger non‐causality test and second‐generation estimators. The findings reveal that banks' interdependence, diverse strategies, and policies vary across banks. In 11 banks, CEO pay is not a reward for bank performance or an incentive to perform. Meanwhile, two banks utilize performance‐based pay for their CEOs, while the remaining two adopt CEO pay as a performance motivator. The study concludes that firms' interdependence and policy variations across firms influence the CEO pay–bank performance nexus. [ABSTRACT FROM AUTHOR]

We investigate whether and how managerial risk aversion influences the structuring of the generalist pay premium. We use three candidate variables for managerial risk aversion: the CEO's equity portfolio vega, decision horizon, and wealth. We find that equity‐based pay differs between generalist CEOs (who have broader experience spanning several industries) and non‐generalist CEOs (who tend to have narrower, specialized industry‐specific experience) based on their risk appetite. Further, how the generalist pay premium is structured depends on the risk aversion measure. Because generalist CEOs tend to be better paid than their counterparts, understanding their risk aversion level will help companies improve the structure of these CEOs' compensation packages, and ultimately those of all CEOs. When vega is the risk aversion measure, CEOs get compensated for bearing risk. However, generalist CEOs with high vegas suffer a "risk discount" in their compensation. These generalist CEOs are associated with lower cash, equity, and total pay. CEOs with longer decision horizons get more equity and less cash, but this structuring does not extend to the generalist CEOs. Finally, wealthier CEOs get more cash and total pay. However, generalist CEOs who are wealthier get less cash pay. [ABSTRACT FROM AUTHOR]

In 2013, Korea adopted a mandatory pay disclosure rule applicable only to board members paid above a certain threshold (KRW 500 million, roughly equal to USD 5 million). In this study, we find evidence of Korean executives avoiding disclosure through director deregistration, that is, stepping down from the board, but retaining a non‐registered executive position in the same company. This tendency is stronger when deregistration cost is low (in case of family executives), and benefit is high (in case of high executive‐to‐worker pay ratios). We also find that family executives choose pay cuts over deregistration as means of avoidance when their income loss from pay cuts is relatively low. Last, we find that disclosure avoidance prompts negative share price reactions, leads to higher dividend payouts (in case of large pay cuts) and results in smaller board sizes (in case of family deregistration). [ABSTRACT FROM AUTHOR]

This study examines how and why managers receive pay premiums when vulnerable to social reputation loss. We define sin companies as those operating in the alcohol, gambling and tobacco industries. We show that company managers receive a higher asymmetric pay‐for‐performance sensitivity in their pay in addition to receiving higher total compensation. In other words, their pay increases with firm performance at a faster rate than that of their non‐sin company peers. This finding is consistent with our prediction that sin companies provide greater rewards to their managers upon satisfactory performance, generating a pay premium. We propose two explanations for the reputation pay premium associated with sin‐industry managers: the limited future career opportunities and the difficulty of reconciling managers' self‐identity with the employer's social identity. We find stronger support for the latter explanation. The sin‐industry pay premium is larger when managers have pro‐social and religious tendencies. However, we do not find a smaller pay premium when managers are close to their retirement. Since the career concern should be reduced for managers who are near retirement, this finding is inconsistent with the career opportunity explanation. Overall, our findings are consistent with the notion that managers associate their self‐image with employers' social identities. [ABSTRACT FROM AUTHOR]

Although new investment can be viewed as a decision to pursue projects from a wide number of growth opportunities with easily discernible (and presumably preferable) risk profiles, downsizing (e.g., through layoffs, plant closings, asset divestitures, etc.) is a dichotomous choice to either abandon or continue an existing project where the relative risk between these options is not clear. Our evidence suggests that vega in the pre‐downsizing period is associated with risky investment that necessitates future downsizing. We further find that contemporaneous vega is associated with a greater likelihood of downsizing. On the other hand, our evidence suggests that delta is a significant impediment to downsizing. We examine the influence of behavioral factors in the decision‐making process and find downsizing decisions are discouraged by managerial overconfidence but encouraged by managers' aversion to ambiguity. Finally, we investigate whether equity incentives and behavioral factors lead to better downsizing decisions. We find that downsizing firms with high ambiguity perform better after downsizing relative to their matched pair with lower ambiguity. [ABSTRACT FROM AUTHOR]

Chief Executive Officer (CEO) contractual protection, in the forms of CEO employment agreements and CEO severance pay agreements, is prevalent among S&P 1500 firms. While prior research has examined the impact of these agreements on corporate decisions from shareholders' perspective, there is little research on the impact from debt holders' perspective. We find that, compared with other loans, loans issued by firms with CEO contractual protection on average contain more performance covenants and performance‐pricing provisions. This effect increases with CEOs' risk‐taking incentives and opportunities, but it decreases with CEOs' preference for and opportunity of enjoying a quiet life. Furthermore, for loans issued by firms with CEO contractual protection, debt holders include stricter covenants, charge a higher interest rate and use a more diffuse syndicate structure. Collectively, these results shed light on the impact of CEO contractual protection on debt contracting. [ABSTRACT FROM AUTHOR]

This study examines whether compensation committee quality and corporate social responsibility are related to CEO excess compensation. Using a U.S. sample from 2008 to 2013, this study finds that high-quality compensation committees can design compensation arrangements that limit CEOs' ability to extract excessive compensation. Furthermore, according to this study, CEOs tend to overinvest in corporate social responsibility in order to extract extra compensation. [ABSTRACT FROM AUTHOR]

This paper aims to contribute to the extant literature on corporate social responsibility and corporate governance by empirically examining the effect of firm governance and shareholding structure (and their interaction) on corporate social responsibility performance. Our study is conducted within a unique context of improving social responsibility policies, regulations, and management. In particular, we examine how corporate governance practices and both outside (institutional and pension) and inside (managerial) shareholdings impact corporate social responsibility activities. Using one of the largest UK data sets to date, consisting of FTSE 350 nonfinancial listed firms for the period from 2002 to 2016, our results provide evidence that corporate governance has a positive impact on corporate social responsibility. Institutional (indicating strong monitoring role) and managerial (proxy for alignment of interests between insiders and outsiders) shareholdings are negatively associated with corporate social responsibility performance. Our additional analyses provide empirical evidence that compensation structure, as a corporate governance tool, aligns management decisions toward engaging in corporate social responsibility activities and corporate strategic sustainable objectives. Additionally, our results suggest a substitutive relationship of institutional shareholding with corporate governance practices. There is a complementary relationship of managerial shareholding with corporate governance practices in influencing corporate social responsibility. Our evidence is robust after controlling for entrenched managerial shareholding, 2SLS and alternative measures of corporate social responsibility performance. The findings provide empirical support for the UK Corporate Governance Code's emphasis on designing effective remuneration policies and practices. [ABSTRACT FROM AUTHOR]

This article analyses factors influencing the choice of performance measure in CEO equity‐based compensation, for a sample of 3,400 plans from 400 UK firms between 2007 and 2015. We examine the effect of the volatility of earnings per share (EPS) and of total shareholder returns (TSR) on the choice of performance measures, taking into account four categories of measure: EPS alone, TSR alone, EPS and TSR jointly, or neither EPS nor TSR. This allows us to utilize a comprehensive cross‐section of plans. The results are robust to controlling for plan types, the use of different compensation consultants, industry and time‐specific effects. We find that "EPS and TSR jointly" is the most common category of performance measure employed by firms. Our empirical results show that firms with higher EPS volatility and lower TSR volatility are more likely to choose TSR as a performance measure and that firms with higher EPS volatility are less likely to choose EPS alone; we argue that these results are consistent with optimal contracting theory. Second, we conduct a novel, detailed description of the performance measures, comparator groups, plan choices, threshold targets and vesting levels at minimum and maximum thresholds, used in CEO compensation contracts. We further argue that commonalities across firms in the elements of target‐setting are evidence of institutional isomorphism. [ABSTRACT FROM AUTHOR]

This study investigates the efficacy of say‐on‐pay (SOP) regulation in mitigating excessive CEO compensation and how it is affected by CEO personal traits and the power distribution inside a corporation. Using IV‐GMM method and a sample of 1,931 firms from Australia, Canada, the UK, and the USA, we find that shareholder voices are successful in reducing the pay gap between CEOs and the median employee, regardless of the exact nature of the regulation. In addition, older CEOs are associated with lower pay ratios and there are some evidences suggesting that older or female CEOs enhance SOP effectiveness. Further, power distribution manifested through corporate governance mechanisms matters, as increasing board size and director and audit committee independence reduce pay ratio. A measure of CEO power, CEO pay slice, has a significant and large positive explanatory power for the model and its exclusion can greatly exaggerate the estimated impact of SOP on pay ratio. Another measure of CEO power, CEO duality, appears to enhance the potency of SOP slightly. There is also some evidence indicating that ownership concentration enhances SOP effectiveness. Our findings have implications for companies, investors, and regulators concerning the importance of power balance structure within corporations. [ABSTRACT FROM AUTHOR]

"Alt finance" refers to distinction made with Paul Lagneau-Ymonet and Fabien Foureault (Benquet, Foureault, and Lagneau-Ymonet [6]) between first- and second-wave finance, which correspond to two ways of circulating and raising capital. Contrary to first-wave finance actors, particularly banks whose profits are tied to debt, second-wave finance actors favor low-interest rates for borrowing and high asset prices for wealth accumulation: "What's good for asset prices is good for asset managers". Accumulation mode and political interests of alternative finance and asset management: are they the same actors? The political interests of the second finance wave: do all asset managers want the same thing... Let's first acknowledge that mainstream and alternative asset managers share common interests due to their similar positions within the finance chains and similar capital accumulation modes. [Extracted from the article]

This paper aims to examine the impact of executive compensation incentive on corporate innovation capability by dividing executive compensation incentive into short-term monetary incentive and long-term equity incentive. We also investigate the interaction between the two types of executive compensation incentive. Data are collected from China's agro-based companies during 2012–2019, and multiple regression analysis is utilized. The empirical results show that short-term monetary incentive has no impact on innovation capability, while long-term equity incentive stimulates innovation capability. Regarding company ownership, the impact of long-term equity incentive in state-owned enterprises is greater than that in private-owned enterprises. In addition, the complementary effect between short-term and long-term compensation incentive has a positive impact on innovation capability regardless of company ownership. The findings of this paper could help agribusiness managers to design the reasonable incentive system to incentivize corporate executives and enhance the capability of independent innovation. [ABSTRACT FROM AUTHOR]

As a crucial component of internal corporate governance, remuneration controls possess the potential to influence the cash holdings of firms. However, identifying the causal relationship between these controls and such holdings presents a considerable challenge. To address this research gap, this paper leverages the implementation of China's Guidance on Further Regulating the Remuneration Management of Heads of Central Enterprises as a quasi-natural experiment to investigate the relationship between executive remuneration controls and firms' cash holdings, utilizing a double-difference approach. Based on an analysis of a sample of listed companies from 2007–2012, the results indicate that firms subject to regulated executive compensation exhibit lower cash holdings. To ensure the robustness of these findings, various statistical techniques such as parallel trend tests, variable replacement, propensity score matching, and placebo tests were employed. Additionally, a mechanism test was conducted, whereby the mediating effect of executive compensation controls on firms' cash holdings was examined, revealing a reduction in internal agency costs. Finally, the analysis of heterogeneity demonstrated that the impact of executive compensation controls on firms' cash holdings was more pronounced in companies with high-quality internal controls, stronger management oversight, and lower information asymmetry. [ABSTRACT FROM AUTHOR]

The theoretical underpinning of compensation for CSR in the SDG era emerges as a trending area for researchers. However, the measurability of CSR is a technical problem for CSR research in developing nations. This study uses 5,699 firm-year observations and entropy measures to assign CSR engagement scores based on CSR breadth and depth. The results reveal that total compensation (TC) behaves according to stewardship theory and positively influences CSR engagement, breadth, and depth. However, fixed (FC) and variable (VC) compensations follow agency theory and have a negative and positive impact on CSR engagement, breadth, and depth, respectively. We also examine the impact of TC, FC, and VC on CSR engagement levels in firms' external and internal control. We observe that high-leverage firms hold the baseline result, whereas, in internal control, the non-business group firms hold the baseline result. Moreover, in institutional ownership, we find that TC and VC follow the stewardship and agency theories and positively affect CSR engagement. In contrast, the impact of FC on CSR engagement is not affected by institutional ownership. The findings of this study can help policymakers improve CEO compensation structures to increase CSR practices and ensure the achievement of SDGs by 2030. [ABSTRACT FROM AUTHOR]

Purpose: This study investigates the relationship between executive compensation and firm performance in Chinese new energy companies. Design/Methodology/Approach: The financial data of 122 Chinese-listed energy companies from 2010-2021 is selected for the empirical study. Findings: Executives' monetary compensation and executives' shareholding ratio are positively related to corporate performance. Overseas background and financial background play a moderating role in the effect of executives' monetary compensation and their shareholding ratio on corporate performance. Conclusion: The fact that executives' salaries and shareholding both have a significant positive impact on business performance demonstrates the effectiveness of pay incentives and equity-based incentive. The research additionally demonstrates that an executive's financial knowledge and experience in other countries alter the impact of cash and equity pay on company performance. Research Limitations/Implications: The research excludes a large number of key energy businesses, especially rising ones in the clean energy sector, as it solely targets publicly traded businesses for ease of data collection. Practical Implications: The survey results help to further understand the key factors of compensation incentives for managers in energy companies and are informative for the effectiveness of compensation incentives in energy companies. Contribution to Literature: This study provides empirical results on the impact of managerial compensation on firm performance in energy firms in the Chinese context, adding a new step to the existing literature. [ABSTRACT FROM AUTHOR]

This article examines the effects of foreign experience on the remuneration policy of companies listed in an emerging market. Applying regressions by GMM-Sys method in 230 Brazilian firms between 2010 and 2018, we find that an international academic experience cause executives to receive lower salaries. However, companies valued the experience of working abroad with more generous compensation. These relationships are consistent for total, base, variable, stock and option compensation and direct and indirect benefits, even when we moderate by the executive´s tenure and age. [ABSTRACT FROM AUTHOR]

Problem definition: Firms often delay the decision to recall faulty medical devices long after they become aware of a defect, thereby putting public safety at heightened risk. However, the factors contributing to these delays are not well-understood. To help address this gap, we examine whether and how CEO stock ownership influences the speed with which faulty medical devices are recalled and whether this influence varies with recall severity. We then examine whether the stock market penalizes firms differently based on recall decision-making speed and whether this penalty also varies with recall severity. Methodology/results: We collect data on 2,144 medical device recalls across 50 public medical device firms from 2002 to 2015. We use accelerated failure time models to test the effects of CEO stock ownership on the time-to-recall and event study methodology to examine how the time-to-recall influences stock market returns. Supplementary analyses shed further light on underlying mechanisms. Robustness checks demonstrate consistent results, including coarsened exact matching, reverse causality tests, Cox proportional hazard models, generalized linear regression models, and a mediation analysis. Firms whose CEOs possess greater ownership stakes recall medical devices more slowly, and this recall-slowing effect is accentuated for high-severity recalls. Delaying recalls magnifies the stock market penalty attributable to the recall, particularly for high-severity recalls. Managerial implications: Our study highlights an ownership characteristic of firms that are more likely to delay recalling faulty medical devices. Boards of directors can use insights from our study as they oversee product-quality decisions and determine the level and form of CEO compensation, and the FDA can use our findings to identify firms that might warrant extra scrutiny and better allocate its limited monitoring resources. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2021.0175. [ABSTRACT FROM AUTHOR]

The U.S. Tax Court case Clary Hood, Inc v. Commissioner involves a closely held C corporation's dispute regarding the reasonableness of executive/shareholder compensation tax deductions. There was no dispute in this litigation that CHI was an extremely successful specialty construction company during the tax years at issue. And, there was no dispute in this litigation that Clary Hood, the company CEO and (with his wife) shareholder, was largely responsible for the construction company's success during the tax years at issue. The disputed issue in the litigation was whether the bonuses paid to Hood in 2015 and 2016 exceed a reasonable amount of executive compensation for the services Hood actually performed for the company. In its memorandum decision, the Tax Court provided a fulsome discussion of the methodology and analysis it applied in addressing this reasonableness of executive/shareholder compensation issue. This judicial discussion provides meaningful practical guidance. [ABSTRACT FROM AUTHOR]

Bank executives' substantial compensation is seen as one of the factors that contributed to the risk-taking that led to the 2008–2009 financial crisis. We test whether and how pay disparities between CEO and non-CEO executives—the so-called CEO pay gap—influences risk-taking at publicly traded commercial banks in the U.S. We find strong evidence that larger CEO pay gaps are associated with lower risk levels, improved financial performance, and greater information transparency. Our findings are unique to banks and are consistent with the CEO power proposition. We corroborate this proposition by linking larger pay gaps to increased CEO power and low CEO turnover-performance sensitivity. Our results imply that placing absolute limits on bank CEO pay would likely result in increased bank risk-taking. [ABSTRACT FROM AUTHOR]

Research question/issue: We examine whether linking executive compensation to climate‐related performance is associated with better firm‐level climate change impact. We also explore the interaction of culture and climate‐linked incentive compensation with climate change impact. Research findings/insights: Using firm‐level climate change strategy and carbon emissions to measure climate change impacts, we find that climate‐linked compensation is associated with improved climate change strategy. Climate‐related incentives for the CEO and other (operational) executives are found to be negatively associated with firm‐level carbon emissions, although the relationship is not as strong; however, no such association is found for climate‐linked compensation of the board and top‐3 executives. Country‐level attitudes to whether solutions for environmental issues are considered a joint (society) responsibility versus an individual's personal responsibility are found to have an effect on the association between climate‐linked compensation and climate change impacts. We also find that country‐level cultural views enhance the positive association between climate‐linked compensation and climate change strategy but not the association with actual firm‐level carbon emissions. Further analysis shows that non‐US firms drive our study's findings. Finally, improvement in climate strategy is found to have a positive effect on Tobin's Q but has no effect on profitability. Theoretical/academic implications: Academic research is growing on the role of climate change risk and carbon emissions in corporate decisions. The findings of our study are important given that linking executives' compensation with climate performance is gaining momentum. To the best of our knowledge, this is the first study to examine any link between climate‐linked compensation and climate change impact. Practitioner/policy implications: While climate‐linked compensation is associated with positive changes in climate strategy, its association with firm‐level carbon emissions is promising. This is particularly the case when this compensation is offered to executives who are likely to make operational decisions with a direct impact on a firm's carbon footprint and carbon emissions. [ABSTRACT FROM AUTHOR]

China and Taiwan (so‐called Greater China) are representative of two of the fastest‐growing economies in the Pacific Rim region. This study uses Taiwanese high‐tech firms as sample and explores whether boards of directors attempt to avoid opportunistic reductions in research and development (R&D) investments by CEOs. This study considers a scenario in which high‐tech firms face a small earnings decline or a small loss but their CEOs could opportunistically cut R&D investments to improve financial results. The focus of this study is to examine how corporate control (whether or not a firm is controlled by a family) and market competition affect the relationship between R&D investments and CEO compensation schemes. Overall, we find that the stock‐based incentive compensation is more effective than the cash compensation in deterring managerial opportunism. In non‐family firms, we find there exists a positive significant relationship between changes in R&D expenditures and changes in CEO stock‐based compensation when a firm is faced with a small earnings decline or a small loss. Specifically, compared to family firms, the boards of directors of non‐family firms face more severe agency problems (as a result of the separation of ownership and control) and therefore tend to significantly adjust the incentive components in CEO compensation schemes to deter managerial opportunism. Regarding the effect of market competition, we find that incentives to adjust compensation plan to remove CEOs from opportunistically reducing discretionary R&D investments are greater in firms facing more intense market competition. [ABSTRACT FROM AUTHOR]

The carbon emissions trading scheme (CETS) is an important institutional innovation that internalizes external costs caused by corporate carbon emissions and promotes firms to engage in green development. Based on a 2009–2019 sample of Chinese enterprises of heavily polluting industries listed on the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE), this paper employs the difference‐in‐differences model to examine the effect of CETS on corporate green investment and discuss the moderating effects of external pressure and internal incentive. We find that the implementation of CETS significantly promotes corporate green investment, and this finding still holds after a series of robustness tests such as Propensity Score Matching‐Difference in Differences (PSM‐DID) method and alternative measure of green investment. The heterogeneity analysis indicates that the positive effect of CETS is stronger in large‐scale enterprises, state‐owned firms, and companies located in regions with strict environmental regulation. In addition, less local government intervention and more internal executive compensation incentive significantly enhance the positive impact of CETS on corporate green investment. [ABSTRACT FROM AUTHOR]

This article studies how the three-way interaction among shareholders, creditors, and managers shapes firms' executive compensation. Firms with a higher ownership share by "dual holders"—institutional investors that simultaneously hold equity and bond of the company—adopt a less risk-inducing compensation structure: less stock options and more inside debt. Exploiting financial institution mergers that increase or decrease dual ownership for portfolio companies, we identify a causal link between dual ownership and CEO compensation policies. Mutual fund proxy voting data suggest that shareholder voting is an important channel for dual holders to implement less convex contracts. [ABSTRACT FROM AUTHOR]

Social categorization theory argues that ethnic minority executives are more likely to be ostracized by the majority. This in turn leads to these minorities quitting the organizations where they are currently working. However, the perspective of social categorization ignores the ethnic minority institutional backgrounds of different countries and regions. This study examined the inhibiting effect of ethnic minority status on executive turnover from the perspective of institutional theory and explored the potential mediating and moderating variables in the relationship. Based on 42,350 executive-year observations of A-share listed companies in China's Shanghai and Shenzhen stock market exchanges from 2009 to 2018 and their one-year lagged turnover data, ethnic minority status was found to promote executives' political capital and then decrease the subsequent turnover behavior of ethnic minority executives. Moderated mediation analysis revealed that the indirect negative effect of ethnic minority status on executive turnover through political capital was moderated by ethnic autonomous regions. The indirect negative relationship between ethnic minority status and executive turnover was found to be stronger when the executive is from a non-ethnic than an ethnic autonomous region. Our results have theoretical and practical implications for the management of ethnic minority executives and the design of ethnic minority institutions. [ABSTRACT FROM AUTHOR]

This concept paper synthesizes two theories of executive remuneration. Soundly motivated, the two manifestations of agency theory of equity examine the market for managerial labor. The first theory models two families of determinants of Chief Executive Officer remuneration: economic factors and wealth expropriation. The second theory models equilibrium corporate governance quality by treating the Chief Executive Officer as a rational maximizer of her own wealth utility. This theory complements the first by facilitating consideration of the contextual role played by Chief Executive Officer greed, in undermining equilibrium pricing of economic factors and the efficacy of corporate governance mechanisms. [ABSTRACT FROM AUTHOR]

This study investigates the mechanisms through which the executive pay gap affects the disclosure of environmental, social, and governance (ESG) information. Utilizing panel data from China's A‐share listed firms between 2012 and 2020, our findings reveal a significant positive correlation between the executive pay gap and ESG disclosure, with real earnings management playing a partial mediating role. Notably, the impact of the executive pay gap on ESG disclosure is more pronounced in voluntary disclosure firms and those with low internal control levels, as compared to mandatory disclosure firms and those with high internal control levels. This study provides international evidence for the strategic disclosure behavior of ESG information and the necessity of ESG disclosure regulation. [ABSTRACT FROM AUTHOR]

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The use of malus and clawback provisions has increased in recent years due to the demand for tighter controls on incentive-based compensation. The alignment between executive pay and individual performance creates a culture of responsible decision-making and accountability within an organisation. This paper seeks to evaluate the current state of governance legislation on the clawback of remuneration in the South African context. A systematic literature review was conducted to provide descriptive insight on the technical and procedural approach applied to the clawback of remuneration. These findings were then compared to other countries so that similarities, differences, and areas of further research could be identified. Through detailed content analysis, it was found that the South African governance regime lags behind its international counterparts regarding remuneration clawback. Due to the absence of relevant statutory guidelines, discretion is frequently applied, leading to inconsistent treatment of clawback amongst listed companies. The use of clawback as a risk-mitigation mechanism is also relatively new in South Africa and comparative studies provide useful insight on the technicalities and administration processes applied abroad. The lessons learnt and strategies applied internationally serve as a benchmark for the development of clawback legislation in South Africa. [ABSTRACT FROM AUTHOR]

The corporate governance reform promulgated in 2015 in Japan has contributed to a substantial increase of board independence and a reduction of average board tenure. Our empirical analysis covering 3405 public companies demonstrates that reinvigorated corporate oversight and an increasing post-reform shift towards prioritization of shareholder value have led to a persistent increase of corporate profitability, asset productivity, dividend payouts, acquisitions' value, and valuation multiples. We also document a significant increase of sensitivity of executives' and directors' compensations to the dynamics of firms' bottom lines. The positive changes are the most pronounced within companies where independent directors constitute a majority on the board. The most notable drawbacks of the reform are a significant reduction in net employment creation and in employee turnover within the largest companies. These might be a possible reason for the documented improvement in corporate performance. The number of part-time employees has also seen a significant increase. While being prima facie focused on reinvigorating the private sector, the corporate governance reform may implicitly undermine the established social contract based on job security. Therefore, our study is important from the perspective of sustainable development of the corporate sector as it demonstrates that while concentrating on improving corporate governance, it is also necessary to consider the business' social responsibility. [ABSTRACT FROM AUTHOR]

We examine how board ethnic diversity impacts executive pay‐to‐performance sensitivity. Using firm‐year observations in Australia for the period 2007–2017, we document that board ethnic diversity leads to higher executive pay‐to‐performance sensitivity. The finding is robust in controlling for endogeneity using instrumental variable regression analysis, as well as using modified measures of board ethnic diversity. We also document that the impact of board ethnic diversity on executive pay‐to‐performance sensitivity is more pronounced for firms suffering from high agency costs and when the CEO's ethnicity is different from that of the majority of the board. This study helps to inform the debate on the issue of board ethnic diversity in Australia. [ABSTRACT FROM AUTHOR]

We investigate how mutual funds with environmental, social, and governance (ESG) objectives vote on shareholder proposals related to executive compensation. Using a sample of 94,695 votes by 2,354 mutual funds from 2012 to 2021, we find ESG funds are 9.4 percent more likely than non-ESG funds to vote in favor of such proposals, and the likelihood increases to 19.2 percent for proposals aligning executive compensation with environmental and social (ES) objectives. ESG funds are also 14.9 percent more likely to support proposals to improve transparency, but only 7.0 percent more likely to support proposals about redesigning compensation. Our results are consistent with ESG funds perceiving greater net benefits from supporting shareholder compensation proposals, particularly those related to ES objectives and transparency. Additionally, funds committed to ESG objectives in regulatory filings are more likely to support such proposals than fund families that voluntarily signed the United Nations' Principles of Responsible Investment. JEL Classifications: G23; G30; M12; M14. [ABSTRACT FROM AUTHOR]

Using a sample of Australian Securities Exchange Ltd. (ASX) 500 firms over the 2004–2020 period, we find that contracting on corporate social responsibility (CSR) increases the likelihood of CSR restatements and that these restatements are biased toward showing improvements in CSR performance for the current period. This is especially the case when firms contract on social CSR performance measures. We also find that CEOs' short-term incentive compensation is significantly greater when restatements result in improved comparative performance, but only for firms that contract on CSR. Overall, our results suggest that contracting on CSR is another explanation for the increasing prevalence of CSR restatements and that standard setters should address metrics and measures when formulating policies with respect to CSR reporting. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M12; M14; M52. [ABSTRACT FROM AUTHOR]

Although the integration of corporate social responsibility (CSR) into CEO compensation contracts (hereafter, CSR contracting) has become prevalent in recent years, scholars and practitioners are increasingly concerned about the quality of CSR contracting. Using hand-collected information of S&P 500 firms from proxy statements, I construct an empirical proxy for CSR contracting quality and show that the quality is higher when the compensation committee has more CSR-related expertise. Further, I find that CSR contracting quality is positively associated with future CSR performance, and this effect is stronger when compensation committee CSR expertise is higher. Overall, this evidence highlights the importance of compensation committees' CSR-related expertise in designing high-quality CSR contracting and improving CSR contracting efficiency. Data Availability: All data are available from public sources mentioned in the text. [ABSTRACT FROM AUTHOR]

This study investigates the determinants of compensation disclosure transparency in the context of the Securities and Exchange Commission (SEC) compensation regulation of 2006. Specifically, it focuses on incentive-related compensation disclosure required by Reg. S-K 402(b). I find that compensation disclosure transparency is negatively associated with managerial power and proprietary cost but is positively associated with external monitoring. These findings hold for both the pre- and postregulation periods. Furthermore, the effects from proprietary cost become weaker in the postregulation years, and stronger external monitoring tends to reduce the negative relations between compensation disclosure transparency and managerial power and proprietary cost. Finally, I document an inverted U-shape relation between excess CEO compensation and compensation disclosure transparency. [ABSTRACT FROM AUTHOR]

This article investigates the role external advice plays in the board's determination of chief executive officer (CEO) compensation. We show that CEO incentive pay increases with the degree of compensation consultant independence using a quasi-natural experiment provided by the creation of an independent consultant after separation from an affiliated consultant. Specifically, switching to an independent consultant significantly increases the pay–performance sensitivity and relative performance evaluation of CEO contracts. Despite the benefits of independent advice, independent consultants may not be hired due to the influence of powerful CEOs or because boards already possess adequate expertise. [ABSTRACT FROM AUTHOR]

The behavioral agency model (BAM) posits that executives endow current wealth, but do not endow prospective wealth. As a result of this endowment effect, executives are risk averse with current wealth and risk seeking with prospective wealth. These relationships, however, assume that all executives perceive and attend to current and future outcomes similarly, which is at odds with research on temporal orientations. Drawing on the concept of temporal focus, we theorize that present-focused CEOs adhere to the BAM's endowment effect, while exhibiting even stronger relationships between current and prospective wealth and risk taking. In contrast, by nature of being forward-looking, future-focused CEOs endow prospective wealth instead of current wealth, thereby reversing the main relationships of the BAM. Using a sample of 7,700 CEO-year observations from 2003 to 2016, we find empirical support for our arguments in the context of merger and acquisition investment. Findings from this study advance the BAM by showing that the relationship between wealth type and risk taking hinges on CEOs' temporal focus. [ABSTRACT FROM AUTHOR]

Corporate donations to charities affiliated with the board's independent directors (affiliated donations) are large and mostly undetected due to lack of formal disclosure. Affiliated donations may impair independent directors' monitoring incentives. CEO compensation is on average 9.4% higher at firms making affiliated donations than at other firms, and it is much higher when the compensation committee chair or a large fraction of compensation committee members are involved. We find suggestive evidence that CEOs are unlikely to be replaced for poor performance when firms donate to charities affiliated with a large fraction of the board or when they donate large amounts. [ABSTRACT FROM AUTHOR]