This Research Spotlight provides a summary of the academic literature on CEO pay levels in the United States. It reviews the evidence of:
• Long-term trends in the CEO compensation
• The relation between CEO compensation and governance quality
• The relation between peer group composition and CEO pay
• The relation between compensation consultant selection and CEO pay
This Research Spotlight expands upon issues introduced in the Quick Guide “CEO Compensation”.
Go behind the scenes this summer: Discover the latest issues facing corporate boards.
Stanford Closer Looks are authored by Professor David Larcker and Researcher, Brian Tayan.
- Board Evaluations and Boardroom Dynamics
- From Boardroom to C-Suite: Why Would a Company Pick a
Current Director as CEO?
- An Activist View of CEO Compensation
- The Wells Fargo Cross-Selling Scandal
- Succession “Losers”: What Happens to Executives Passed Over for the CEO Job?
The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.
A roadmap to understanding the fundamental concepts of corporate governance based on theory, empirical research, and data. This guide takes an in-depth look at CEO succession planning.
This Research Spotlight provides a summary of the academic literature on outside (non-executive) directors and directors who are independent according to New York Stock Exchange listing requirements.
It reviews the evidence of:
• Shareholder reaction to the appointment of outside directors
• The relation between outside directors and performance
• The relation between outside directors and mergers and acquisitions
• The relation between outside directors and CEO compensation
• Factors that influence the “independence” of outside directors
This Research Spotlight expands upon issues introduced in the Quick Guide “Board of Directors: Structure and Consequences.”
By David Larcker and Brian Tayan, CGRI Research Spotlight Series. Corporate Governance Research Initiative (CGRI), Stanford Graduate School of Business, October 2016.
This Research Spotlight provides a summary of the academic literature on internal and external CEOs.
It reviews the evidence of:
• Trends in hiring external CEOs
• Operating condition of companies that hire internal and external CEOs
• Stock market reaction to hiring external CEOs
• Relative performance of internal and external CEOs
This Research Spotlight expands upon issues introduced in the Quick Guide “CEO Succession Planning.”
David F. Larcker and Brian Tayan
Stanford Closer Look Series
June 24, 2016
One of the most controversial issues in corporate governance is whether the CEO of a corporation should also serve as chairman of the board. In theory, an independent board chair improves the ability of the board to oversee management. However, an independent chairman is not unambiguously positive, and can lead to duplication of leadership, impair decision making, and create internal confusion—particularly when an effective dual chairman/CEO is already in place.
In this Closer Look, we examine in detail the leadership structure of publicly traded corporations and the circumstances under which they are changed. We ask:
• What factors should the board consider in deciding whether to combine or separate board leadership?
• How can the board weigh the tradeoffs between stability of leadership, efficient decision making, and decreased oversight?
• What structure should be the default setting for a corporation?
• Why do activists advocate that corporations strictly separate the roles when there is little research support for this position?
Go behind the scenes this summer: Discover the latest issues facing corporate boards.
Stanford Closer Looks are authored by Professor David Larcker and Researcher, Brian Tayan.
- Board Evaluations and Boardroom Dynamics
- From Boardroom to C-Suite: Why Would a Company Pick a
Current Director as CEO?
- An Activist View of CEO Compensation
- The Wells Fargo Cross-Selling Scandal
- Succession “Losers”: What Happens to Executives Passed Over for the CEO Job?
The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance and executive leadership. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important. Larcker and Tayan are co-authors of the books Corporate Governance Matters and A Real Look at Real World Corporate Governance.
A roadmap to understanding the fundamental concepts of corporate governance based on theory, empirical research, and data. This guide takes an in-depth look at CEO succession planning.
This Research Spotlight provides a summary of the academic literature on outside (non-executive) directors and directors who are independent according to New York Stock Exchange listing requirements.
It reviews the evidence of:
• Shareholder reaction to the appointment of outside directors
• The relation between outside directors and performance
• The relation between outside directors and mergers and acquisitions
• The relation between outside directors and CEO compensation
• Factors that influence the “independence” of outside directors
This Research Spotlight expands upon issues introduced in the Quick Guide “Board of Directors: Structure and Consequences.”
By David Larcker and Brian Tayan, CGRI Research Spotlight Series. Corporate Governance Research Initiative (CGRI), Stanford Graduate School of Business, October 2016.
This Research Spotlight provides a summary of the academic literature on internal and external CEOs.
It reviews the evidence of:
• Trends in hiring external CEOs
• Operating condition of companies that hire internal and external CEOs
• Stock market reaction to hiring external CEOs
• Relative performance of internal and external CEOs
This Research Spotlight expands upon issues introduced in the Quick Guide “CEO Succession Planning.”
David F. Larcker and Brian Tayan
Stanford Closer Look Series
June 24, 2016
One of the most controversial issues in corporate governance is whether the CEO of a corporation should also serve as chairman of the board. In theory, an independent board chair improves the ability of the board to oversee management. However, an independent chairman is not unambiguously positive, and can lead to duplication of leadership, impair decision making, and create internal confusion—particularly when an effective dual chairman/CEO is already in place.
In this Closer Look, we examine in detail the leadership structure of publicly traded corporations and the circumstances under which they are changed. We ask:
• What factors should the board consider in deciding whether to combine or separate board leadership?
• How can the board weigh the tradeoffs between stability of leadership, efficient decision making, and decreased oversight?
• What structure should be the default setting for a corporation?
• Why do activists advocate that corporations strictly separate the roles when there is little research support for this position?
This presentation describes employee engagement, the three inclinations employees have towward being engaged, a spectrum of engagement, eight factors that affect engagement levels, and information about surveys and the correlation between engagement - personal behaviors - business results.
Succession “Losers”: What Happens to Executives Passed Over for the CEO Job?
By David F. Larcker, Stephen A. Miles, and Brian Tayan
Stanford Closer Look Series
Overview:
Shareholders pay considerable attention to the choice of executive selected as the new CEO whenever a change in leadership takes place. However, without an inside look at the leading candidates to assume the CEO role, it is difficult for shareholders to tell whether the board has made the correct choice. In this Closer Look, we examine CEO succession events among the largest 100 companies over a ten-year period to determine what happens to the executives who were not selected (i.e., the “succession losers”) and how they perform relative to those who were selected (the “succession winners”).
We ask:
• Are the executives selected for the CEO role really better than those passed over?
• What are the implications for understanding the labor market for executive talent?
• Are differences in performance due to operating conditions or quality of available talent?
• Are boards better at identifying CEO talent than other research generally suggests?
United Minds’ Forward to Work: Leadership in Uncertain TimesWeber Shandwick
United Minds’ Forward to Work: Perspectives to Guide Re-entry webinar series explores different considerations for people, culture, and change leaders managing the return to work.
In our fourth session, “Leading in Uncertain Times,” former Chief Human Resources Officer of State Street Capital Alison Quirk and President of United Minds Kate Bullinger discussed:
- The leadership challenge before us
- Profile of a leader in these uncertain times
- What employees need from leadership now
- Preparing leaders for re-entry
- Seizing the long-term reinvention opportunity
Please visit our website for more information: http://unitedmindsglobal.com.
We recently supported a leading management consulting firm revamp their employee engagement value proposition. We did this is less than 24 hours and the client loved the results!
Third-party global research commissioned by
the O.C. Tanner Institute, featuring quantitative
and qualitative studies, proves frequent and
effective employee recognition is highly
correlated to increased engagement,
productivity, innovation, trust, and tenure.
Insights from the Best Boss To Work With Challenge by Pragati Leadership. Pragati Leadership is the best leadership training company in India which offers top leadership development programs. For more details, please visit: https://www.pragatileadership.com/
The State of Corporate Reputation in 2020: Everything Matters NowWeber Shandwick
This new survey was conducted among executives from 22 markets worldwide and examines what drives a company’s reputation, why it is important to be highly regarded and the benefits that come with having a strong corporate reputation.
This third installment, on the topic of Employee Engagement and Retention, looks in some depth at the employee-employer relationship, including issues such as employee loyalty, happiness and commitment to the job. It also examines views about the employer’s reputation as a preferred place to work, and the circumstances under which employees explore alternative jobs and careers.
Chief Diversity Officers Today: Paving the Way for Diversity & Inclusion SuccessWeber Shandwick
This workplace diversity and inclusion survey, conducted among D&I professionals at high revenue companies in the U.S., focuses on the best practices of D&I functions that are well-aligned with the overall business strategy of the company and the roles, responsibilities, and challenges facing today's Chief Diversity Officers (CDOs).
In this report, Blessing White reviews key findings from our 2008 State of Employee Engagement global research and share strategies for delivering on the promises of employee engagement (employee retention strategy, employee motivation strategy).
Outcome over Hours - The shifting focus of employee performance Kelly Services
The 2013 Kelly Global Workforce Index supports the notion that most employees are not satisfied with the level of remuneration they receive from employers. Respondents were asked to what degree the pay or compensation they received for their work was equitable. Globally, only 38 percent believe they are paid a fair amount for their work.
Help Young Talent Develop a Professional MindsetDaniel Goleman
There is a chasm between what business leaders expect from recent graduates, and what these new hires offer. In a Hay Group study of 450 business leaders and 450 recent graduates based in India, the US, and China… a massive 76% of business leaders reported that entry-level workers and recent grads are not ready for their jobs.
In most cases, these hires are intelligent, ambitious, and technically savvy. They have proven their ability to accomplish the work. They’re committed and passionate about rising through the ranks. So what are these new professionals missing?
They’re lacking soft skills.
How performance recognition impacts innovation and employee engagementO.C. Tanner
What is a big company without a solid set of employees? How would Google, Microsoft, or Amazon function if they were run by one man behind a computer? The answer might be, they would function quite well for awhile—after all, that is how most of the biggest companies are started. But what about once they pick up? Once Amazon started shipping packages to millions of people across the world, it might not have worked quite as well with one man in his garage.
At the core, a company’s employees are everything. They are the ones that keep things running, that make the company what it is—whether good or bad. So it is only common decency that you should reward them with the due amount of respect and recognition that they deserve. But it is more than common decency that makes performance recognition a crucial facet of any successful business. As you can see from the slides, there is a lot of research that has proven the effect of proper employee recognition programs on things such as employee engagement, drive, work relationships, and employee retention (to name just a few). For more information, take a glance through the slides and see for yourself—happy employees make for a happy business.
By David F. Larcker, Nicholas E. Donatiello, Brian Tayan
CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance at Stanford University, February 2017
In summer 2016, the Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 1,554 individuals to understand how the American public views CEOs who engage in potentially unethical behavior, and the public’s determination of “fair punishment” for these actions.
The study reveals that almost half of Americans believe CEOs should be fired (or worse) for unethical behavior. Violations of trust between company and customer are considered the most egregious. And, the public is surprisingly critical of CEOs who engage in “immoral” personal actions. Key takeaways include:
Almost half of Americans believe CEOs should be fired (or worse) for unethical behavior.
Violations of trust between company and customer are considered most egregious.
The public is surprisingly critical of CEOs who engage in “immoral” personal actions.
“We find that the public is highly critical of—and very willing to fire—CEOs who engage in behaviors that are morally or ethically questionable, even if these actions are not illegal and in some cases even if they cause no obvious harm to shareholders, employees, or the public,” says Professor David F. Larcker, Stanford Graduate School of Business. “This reflects, in part, the public’s lingering distrust of large corporations and CEOs in general.”
KEY FINDINGS INCLUDE THE FOLLOWING:
1. MEMBERS OF THE PUBLIC ARE EXTREMELY CRITICAL OF CEOS WHO ENGAGE IN QUESTIONABLE BEHAVIOR.
2. THE PUBLIC BELIEVES A VIOLATION OF TRUST BETWEEN A COMPANY AND ITS CUSTOMERS IS THE MOST EGREGIOUS ETHICAL VIOLATION A CEO CAN MAKE.
3. BOARDS OF DIRECTORS ARE STRICTER THAN THE PUBLIC IN ADMINISTERING PUNISHMENT.
4. AMERICANS ARE SURPRISINGLY CRITICAL OF POTENTIALLY IMMORAL BEHAVIOR.
5. MALE AND FEMALE CEOS ARE HEL
This presentation describes employee engagement, the three inclinations employees have towward being engaged, a spectrum of engagement, eight factors that affect engagement levels, and information about surveys and the correlation between engagement - personal behaviors - business results.
Succession “Losers”: What Happens to Executives Passed Over for the CEO Job?
By David F. Larcker, Stephen A. Miles, and Brian Tayan
Stanford Closer Look Series
Overview:
Shareholders pay considerable attention to the choice of executive selected as the new CEO whenever a change in leadership takes place. However, without an inside look at the leading candidates to assume the CEO role, it is difficult for shareholders to tell whether the board has made the correct choice. In this Closer Look, we examine CEO succession events among the largest 100 companies over a ten-year period to determine what happens to the executives who were not selected (i.e., the “succession losers”) and how they perform relative to those who were selected (the “succession winners”).
We ask:
• Are the executives selected for the CEO role really better than those passed over?
• What are the implications for understanding the labor market for executive talent?
• Are differences in performance due to operating conditions or quality of available talent?
• Are boards better at identifying CEO talent than other research generally suggests?
United Minds’ Forward to Work: Leadership in Uncertain TimesWeber Shandwick
United Minds’ Forward to Work: Perspectives to Guide Re-entry webinar series explores different considerations for people, culture, and change leaders managing the return to work.
In our fourth session, “Leading in Uncertain Times,” former Chief Human Resources Officer of State Street Capital Alison Quirk and President of United Minds Kate Bullinger discussed:
- The leadership challenge before us
- Profile of a leader in these uncertain times
- What employees need from leadership now
- Preparing leaders for re-entry
- Seizing the long-term reinvention opportunity
Please visit our website for more information: http://unitedmindsglobal.com.
We recently supported a leading management consulting firm revamp their employee engagement value proposition. We did this is less than 24 hours and the client loved the results!
Third-party global research commissioned by
the O.C. Tanner Institute, featuring quantitative
and qualitative studies, proves frequent and
effective employee recognition is highly
correlated to increased engagement,
productivity, innovation, trust, and tenure.
Insights from the Best Boss To Work With Challenge by Pragati Leadership. Pragati Leadership is the best leadership training company in India which offers top leadership development programs. For more details, please visit: https://www.pragatileadership.com/
The State of Corporate Reputation in 2020: Everything Matters NowWeber Shandwick
This new survey was conducted among executives from 22 markets worldwide and examines what drives a company’s reputation, why it is important to be highly regarded and the benefits that come with having a strong corporate reputation.
This third installment, on the topic of Employee Engagement and Retention, looks in some depth at the employee-employer relationship, including issues such as employee loyalty, happiness and commitment to the job. It also examines views about the employer’s reputation as a preferred place to work, and the circumstances under which employees explore alternative jobs and careers.
Chief Diversity Officers Today: Paving the Way for Diversity & Inclusion SuccessWeber Shandwick
This workplace diversity and inclusion survey, conducted among D&I professionals at high revenue companies in the U.S., focuses on the best practices of D&I functions that are well-aligned with the overall business strategy of the company and the roles, responsibilities, and challenges facing today's Chief Diversity Officers (CDOs).
In this report, Blessing White reviews key findings from our 2008 State of Employee Engagement global research and share strategies for delivering on the promises of employee engagement (employee retention strategy, employee motivation strategy).
Outcome over Hours - The shifting focus of employee performance Kelly Services
The 2013 Kelly Global Workforce Index supports the notion that most employees are not satisfied with the level of remuneration they receive from employers. Respondents were asked to what degree the pay or compensation they received for their work was equitable. Globally, only 38 percent believe they are paid a fair amount for their work.
Help Young Talent Develop a Professional MindsetDaniel Goleman
There is a chasm between what business leaders expect from recent graduates, and what these new hires offer. In a Hay Group study of 450 business leaders and 450 recent graduates based in India, the US, and China… a massive 76% of business leaders reported that entry-level workers and recent grads are not ready for their jobs.
In most cases, these hires are intelligent, ambitious, and technically savvy. They have proven their ability to accomplish the work. They’re committed and passionate about rising through the ranks. So what are these new professionals missing?
They’re lacking soft skills.
How performance recognition impacts innovation and employee engagementO.C. Tanner
What is a big company without a solid set of employees? How would Google, Microsoft, or Amazon function if they were run by one man behind a computer? The answer might be, they would function quite well for awhile—after all, that is how most of the biggest companies are started. But what about once they pick up? Once Amazon started shipping packages to millions of people across the world, it might not have worked quite as well with one man in his garage.
At the core, a company’s employees are everything. They are the ones that keep things running, that make the company what it is—whether good or bad. So it is only common decency that you should reward them with the due amount of respect and recognition that they deserve. But it is more than common decency that makes performance recognition a crucial facet of any successful business. As you can see from the slides, there is a lot of research that has proven the effect of proper employee recognition programs on things such as employee engagement, drive, work relationships, and employee retention (to name just a few). For more information, take a glance through the slides and see for yourself—happy employees make for a happy business.
By David F. Larcker, Nicholas E. Donatiello, Brian Tayan
CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance at Stanford University, February 2017
In summer 2016, the Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 1,554 individuals to understand how the American public views CEOs who engage in potentially unethical behavior, and the public’s determination of “fair punishment” for these actions.
The study reveals that almost half of Americans believe CEOs should be fired (or worse) for unethical behavior. Violations of trust between company and customer are considered the most egregious. And, the public is surprisingly critical of CEOs who engage in “immoral” personal actions. Key takeaways include:
Almost half of Americans believe CEOs should be fired (or worse) for unethical behavior.
Violations of trust between company and customer are considered most egregious.
The public is surprisingly critical of CEOs who engage in “immoral” personal actions.
“We find that the public is highly critical of—and very willing to fire—CEOs who engage in behaviors that are morally or ethically questionable, even if these actions are not illegal and in some cases even if they cause no obvious harm to shareholders, employees, or the public,” says Professor David F. Larcker, Stanford Graduate School of Business. “This reflects, in part, the public’s lingering distrust of large corporations and CEOs in general.”
KEY FINDINGS INCLUDE THE FOLLOWING:
1. MEMBERS OF THE PUBLIC ARE EXTREMELY CRITICAL OF CEOS WHO ENGAGE IN QUESTIONABLE BEHAVIOR.
2. THE PUBLIC BELIEVES A VIOLATION OF TRUST BETWEEN A COMPANY AND ITS CUSTOMERS IS THE MOST EGREGIOUS ETHICAL VIOLATION A CEO CAN MAKE.
3. BOARDS OF DIRECTORS ARE STRICTER THAN THE PUBLIC IN ADMINISTERING PUNISHMENT.
4. AMERICANS ARE SURPRISINGLY CRITICAL OF POTENTIALLY IMMORAL BEHAVIOR.
5. MALE AND FEMALE CEOS ARE HEL
Explore key takeaways shared in our Stanford GSB View From The Top guest speaker series this year.
More leadership insights: http://stanford.io/leadership
Social Media Boot Camp: Which Social Media Platform is right for you? #Blogher15Peg Fitzpatrick
How do you know which social media platform is the right one for you? This social media boot camp presentation from the Blog Her 2015 conference by Peg Fitzpatrick looks at the demographics of the big social platforms so you can choose which fits with your brand or blog.
10 Ways to Create Picture Perfect Posts on InstagramPeg Fitzpatrick
A practical webinar to help you create a memorable and exciting Instagram presence. Jam-packed with actionable tips, this webinar will help you get a grasp on Instagram and provide tips to help you start getting glam on Instagram.
Join powerhouse social media strategist and co-author of the best-selling book The Art of Social Media: Power Tips for Powers Users Peg Fitzpatrick, as she gives tips on:
How to create an Instagram strategy
Using hashtags on Instagram
Creating visuals to attract attention to your Instagram posts
Easy-to-use apps to edit photos
Social media shortcuts - creating a workflow for your Instagram posts
Find me on Instagram here: https://instagram.com/pegfitzpatrick/
And much more on my blog here: http://pegfitzpatrick.com/first-time-here/
Not sure what to share on SlideShare?
SlideShares that inform, inspire and educate attract the most views. Beyond that, ideas for what you can upload are limitless. We’ve selected a few popular examples to get your creative juices flowing.
Authored by: avid F. Larcker, Brian Tayan, CGRI Research Spotlight Series. Corporate Governance Research Initiative (CGRI), April 2020
This Research Spotlight provides a summary of the academic literature on board composition, quality, and turnover. It reviews the evidence of:
The appointment of outside CEOs as directors
The importance of industry expertise to performance
The relation between director skills and performance
The stock market reaction to director resignations
Whether directors are penalized for poor oversight
This Research Spotlight expands upon issues introduced in the Quick Guide Board of Directors: Selection, Compensation, and Removal.
By David F. Larcker, Brian Tayan
CGRI Research Spotlight Series. Corporate Governance Research Initiative (CGRI), 2016
This Research Spotlight provides a summary of the academic literature on how shareholder voting on executive compensation plans influences executive pay. It reviews the evidence of:
The impact of “vote no” campaigns
The impact of shareholder voting on equity compensation plans
The market reaction to say-on-pay legislation and proposals
The impact of say on pay on future pay practices
This Research Spotlight expands upon issues introduced in the Quick Guide “CEO Compensation.”
Study to investigate the correlation between the operating performances of fi...Charm Rammandala
The purpose of this study to understand whether there is a correlation between the operating performance of a firm and its CEO’s compensation. Various scholars and journalists studied and reported in this area over the years with mixed results. Popular notion among general public is that regardless of the performance of the company, CEO’s pay and perks either remain same or increase. Another accusation is most of the mergers and acquisitions taken place to boost the pay of CEO’s rather than to increase the value of shareholder. Study will look in to the validity of these claims to determine whether there is a correlation between the firm performances and the CEO pay
January 23rd, 2012
What Is CEO Talent Worth?
By Professor, David F. Larcker and Brian Tayan, Researcher, Corporate Governance Research Program, Stanford Graduate School of Business
January 24, 2012
The topic of executive compensation elicits strong emotions among corporate stakeholders and practitioners. On the one hand are those who believe that chief executive officers in the United States are overpaid. On the other hand are those who believe that CEOs are simply paid the going fair-market rate.
Much less effort, however, is put into determining whether total compensation is commensurate with the value of services rendered.
We examine the issue and explain how such a calculation might be performed. We ask:
* How much value creation should be attributable to the efforts of the CEO?
* What percentage of this value should be fairly offered as compensation?
* Can the board actually perform this calculation? If not, how does it make rational decisions about pay levels?
Read the attached Closer Look and let us know what you think!
Executive Compensation and IncentivesMartin J. ConyonEx.docxcravennichole326
Executive Compensation and Incentives
Martin J. Conyon*
Executive Overview
The objective of a properly designed executive compensation package is to attract, retain, and motivate
CEOs and senior management. The standard economic approach for understanding executive pay is the
principal-agent model. This paper documents the changes in executive pay and incentives in U.S. firms
between 1993 and 2003. We consider reasons for these transformations, including agency theory, changes
in the managerial labor markets, shifts in firm strategy, and theories concerning managerial power. We show that
boards and compensation committees have become more independent over time. In addition, we demonstrate
that compensation committees containing affiliated directors do not set greater pay or fewer incentives.
Introduction
E
xecutive compensation is a complex and con-
troversial subject. For many years, academics,
policymakers, and the media have drawn atten-
tion to the high levels of pay awarded to U.S.
chief executive officers (CEOs), questioning
whether they are consistent with shareholder in-
terests.1 Some academics have further argued that
flaws in CEO pay arrangements and deviations
from shareholders’ interests are widespread and
considerable.2 For example, Lucian Bebchuk and
Jesse Fried provide a lucid account of the mana-
gerial power view and accompanying evidence.3
Marianne Bertrand and Sendhil Mullainathan too
provide an analysis of the ‘skimming view’ of CEO
pay.4 In contrast, John Core et al. present an
economic contracting approach to executive pay
and incentives, assessing whether CEOs receive
inefficient pay without performance.5 In this pa-
per, we show what has happened to CEO pay in
the United States. We do not claim to distinguish
between the contracting and managerial power
views of executive pay. Instead, we document the
pattern of executive pay and incentives in the
United States, investigating whether this pattern
is consistent with economic theory.
The Context: Who Sets Executive Pay?
B
efore examining the empirical evidence pre-
sented in this paper, it is important to consider
the pay-setting process and who sets executive
pay. The standard economic theory of executive
compensation is the principal-agent model.6 The
theory maintains that firms seek to design the most
efficient compensation packages possible in order to
attract, retain, and motivate CEOs, executives, and
managers.7 In the agency model, shareholders set
pay. In practice, however, the compensation com-
mittee of the board determines pay on behalf of
shareholders. A principal (shareholder) designs a
contract and makes an offer to an agent (CEO/
manager). Executive compensation ameliorates a
moral hazard problem (i.e., manager opportunism)
arising from low firm ownership. By using stock
options, restricted stock, and long-term contracts,
shareholders motivate the CEO to maximize firm
value. In other words, shareholders try to design
optimal compensation packages .
By David F. Larcker and Brian Tayan, Stanford Research Spotlight Series, September 1, 2016
This Research Spotlight provides a summary of the academic literature on the influence that CEOs have on company outcomes (performance and risk). It reviews the evidence of:
• The contribution of the CEO to overall company performance
• The relation between previous managerial experience and future performance
• The relation between personal attributes and performance
• The relation between personality and performance
• Factors that might influence risk tolerance
This Research Spotlight expands upon issues introduced in the Quick Guide “CEO Succession Planning.”
CEO Turnover
By David F. Larcker, Brian Tayan
CGRI Research Spotlight Series. September 2016
This Research Spotlight provides a summary of the academic literature on relation between CEO performance and turnover. It reviews the evidence of:
The relation between performance and likelihood of termination
The relation between board attributes and likelihood of termination
Other factors that might influence CEO performance oversight
This Research Spotlight expands upon issues introduced in the Quick Guide “CEO Succession Planning.”
Executive Compensation: Exploring Models and Considerations in Corporate Remu...assignmentcafe1
Welcome to our comprehensive SlideShare presentation on executive compensation, where we delve into the intricate world of corporate remuneration models and considerations. Join us as we explore the various approaches, challenges, and ethical considerations surrounding executive compensation in today's corporate landscape.
In this enlightening presentation, we aim to provide a nuanced understanding of the complexities involved in determining executive compensation packages. We examine different models and frameworks, including performance-based pay, equity-based incentives, and bonus structures, and assess their effectiveness in aligning executive incentives with organizational goals.
Through a careful analysis of industry practices, regulatory frameworks, and shareholder perspectives, we explore the considerations that shape executive compensation decisions. We delve into the challenges of balancing competitive market forces, ensuring fairness and transparency, and addressing concerns related to income inequality and excessive executive pay.
Furthermore, we examine the impact of executive compensation on corporate governance, organizational culture, and long-term value creation. We discuss the influence of compensation structures on risk-taking behavior, strategic decision-making, and the attraction and retention of top talent within the company.
Our presentation goes beyond theoretical discussions by incorporating real-world examples and case studies. By exploring notable instances of successful and controversial executive compensation practices, we aim to provide practical insights and lessons for organizations navigating this complex landscape.
Through this exploration, we encourage reflection and dialogue on the ethical dimensions of executive compensation. We consider the perspectives of various stakeholders, including shareholders, employees, and society at large, and discuss the importance of designing compensation packages that align with broader social and organizational values.
Join us as we delve into the multifaceted world of executive compensation, analyzing different models, considerations, and ethical implications. Together, let us gain a deeper understanding of the intricacies surrounding corporate remuneration and explore ways to promote fairness, accountability, and long-term sustainable growth.
Running head CASE STUDY 31CASE STUDY 31AbstractThe hu.docxhealdkathaleen
Running head: CASE STUDY 3 1
CASE STUDY 3 1
Abstract
The human resource manager, Don, is tasked with analyzing the compensation package of the CEO and ensuring fair pay to all employees. The factors that outline this pay structure are all vital importance when determining the compensation structure. The staff seen on the front lines are important to the organization but retaining the CEO is a great determining factor in the success of an organization. The CEO has a higher chance of remailing with the company if they are offered a competitive compensation package.
There are numerous segments that make up the director of human resources responsibilities. For this company, these responsibilities lie on Don, who must create the executive pay structure and condense each component. Don needs to gather further information to correctly determine the effective pay rate for the company’s CEO. The best solution for Don is to use the three best hypotheses to depict the procedures identified with setting official remuneration: office hypothesis, competition hypothesis, and processes used in creating executive compensation. These three theories are described by author Marticchio (2017) as the agency theory, tournament theory, and social comparison theory.
If Don were to utilize the agency theory, he would consider pressuring the COE’s proprietorship within the company. If Don chose to make the pay package through the social comparison theory gathering details on the market rates for similar industries is a must. With this theory, Don can also determine any parts of the CEO’s salary that is performance based and use those numbers to show how the CEO is adding success to the company. Though the company may be in a financial bind, this information can give detail into how the CEO is leading the company to a better future.
As the head of HR, Don must steer between implementing the best practices for the CEO's compensation plans or tweaking the compensation to line up with the objectives to of the investors (Hou, Priem, and Goranova). It is normal that Don will come across bothersome instances regarding the CEO’s pay structure and whether it is the more fair or logical decision. This HR executive has the best chance to create an excellent compensation package that all parties would agree on by detailing the pay contrasts directly to the Oakwood workers and featuring the connection that the pay structure has based on the CEO’s performance. By explaining the abilities, skills, and knowledge the COE must bring into his role, it will be better understood that his higher pay is justified. This pay structure works so well because the CEO only benefits when the company grows and gains in profits (Brisker, Colak, and Peterson, 2014). Offering the employees some examples of commitments and achievements the CEo has performed will provide background into how the CEO will further the company and create opportunities for everyone.
Don’s main goal is to ...
This Research Spotlight provides a summary of the academic literature on how dual-class share structures influence firm value and corporate governance quality. It reviews the evidence of:
• The relation between dual-class shares and governance quality
• The relation between dual-class shares and tax avoidance
• The relation between dual-class shares and firm value and performance
This Research Spotlight expands upon issues introduced in the Quick Guide “The Market for Corporate Control.”
Authored by: David F. Larcker, Bradford Lynch, Brian Tayan, and Daniel J. Taylor, June 29, 2020
Investors rely on corporate disclosure to make informed decisions about the value of companies they invest in. The COVID-19 pandemic provides a unique opportunity to examine disclosure practices of companies relative to peers in real time about a somewhat unprecedented shock that impacted practically every publicly listed company in the U.S. We examine how companies respond to such a situation, the choices they make, and how disclosure varies across industries and companies.
We ask:
• What motivates some companies to be forthcoming about what they are experiencing, while others remain silent?
• Do differences in disclosure reflect different degrees of certitude about how the virus would impact businesses, or differences in management perception of its obligations to shareholders?
• What insights will companies learn to prepare for future outlier events?
David F. Larcker and Brian Tayan, April 21, 2020, Stanford Closer Look Series
Little is known about the process by which pre-IPO companies select independent, outside board members—directors unaffiliated with the company or its investors. Private companies are not required to disclose their selection criteria or process, and are not required to satisfy the regulatory requirements for board members set out by public listing exchanges. In this Closer Look, we look at when, why, and how private companies add their first independent, outside director to the board.
We ask:
• Why do pre-IPO companies rely on very different criteria and processes to recruit outside directors than public companies do?
• What does this teach us about governance quality?
• How important are industry knowledge and managerial experience to board oversight?
• How important are independence and monitoring?
• Does a tradeoff exist between engagement and fit on the one hand and independence on the other?
Authored by David F. Larcker and Brian Tayan, April 1, 2020, Stanford Closer Look Series
We examine the size, structure, and demographic makeup of the C-suite (the CEO and the direct reports to the CEO) in each of the Fortune 100 companies as of February 2020. We find that women (and, to a lesser extent, racially diverse executives) are underrepresented in C-suite positions that directly feed into future CEO and board roles. What accounts for this distribution?
By John D. Kepler, David F. Larcker, Brian Tayan, and Daniel J. Taylor, January 28, 2020
Corporate executives receive a considerable portion of their compensation in the form of equity and, from time to time, sell a portion of their holdings in the open market. Executives nearly always have access to nonpublic information about the company, and routinely have an information advantage over public shareholders. Federal securities laws prohibit executives from trading on material nonpublic information about their company, and companies develop an Insider Trading Policy (ITP) to ensure executives comply with applicable rules. In this Closer Look we examine the potential shortcomings of existing governance practices as illustrated by four examples that suggest significant room for improvement.
We ask:
• Should an ITP go beyond legal requirements to minimize the risk of negative public perception from trades that might otherwise appear suspicious?
• Why don’t all companies make the terms of their ITP public?
• Why don’t more companies require the strictest standards, such as pre-approval by the general counsel and mandatory use of 10b5-1 plans?
• Does the board review trades by insiders on a regular basis? What conversation, if any, takes place between executives and the board around large, single-event sales?
Short summary
We identify potential shortcomings in existing governance practices around the approval of executive equity sales. Why don’t more companies require stricter standards to lessen suspicion around insider equity sales activity? Do boards review trades by insiders on a regular basis?
By David F. Larcker, Brian Tayan
Core Concepts Series. Corporate Governance Research Initiative,
A roadmap to understanding the fundamental concepts of corporate governance based on theory, empirical research, and data. This guide takes an in-depth look at the Principles of Corporate Governance.
Authors: David F. Larcker and Brian Tayan, Stanford Closer Look Series, November 25, 2019
Among the controversies in corporate governance, perhaps none is more heated or widely debated across society than that of CEO pay. The views that American citizens have on CEO pay is centrally important because public opinion influences political decisions that shape tax, economic, and regulatory policy, and ultimately determine the standard of living of average Americans. This Closer Look reviews survey data of the American public to understand their views on compensation. We ask:
• How can society’s understanding of pay and value creation be improved and the controversy over CEO pay resolved?
• How should the level of CEO pay rise with complexity and profitability, particularly among America’s largest corporations?
• Should pay be reformed in the boardroom, or should high pay be addressed solely through the tax code?
• Are negative views of CEO pay driven by broad skepticism and lack of esteem for CEOs? Or do high pay levels themselves contribute to low regard for CEOs?
By David F. Larcker and Brian Tayan
CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance, November 2019.
In fall 2019, the Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of In October 2019, the Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 3,062 individuals—representative by age, race, political affiliation, household income, and state residence—to understand the American population’s views on current and proposed tax policies.
Key findings include:
--Tax rates for high-income earners are about right
--Majority favor a wealth tax … but not if it harms the economy
--Americans do not want to set limits on personal wealth
--Americans do not believe in a right to universal basic income
--Trust in the ability of the U.S. government to spend tax dollars effectively is low
--Americans believe in higher taxes for corporations who pay their CEO large dollar amounts
--Little appetite exists to break up “big tech”
By David F. Larcker, Brian Tayan, Dottie Schindlinger and Anne Kors, CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance and the Diligent Institute, November 2019
New research from the Rock Center for Corporate Governance at Stanford University and the Diligent Institute finds that corporate directors are not as shareholder-centric as commonly believed and that companies do not put the needs of shareholders significantly above the needs of their employees or society at large. Instead, directors pay considerable attention to important stakeholders—particularly their workforce—and take the interests of these groups into account as part of their long-term business planning.
• While directors are largely satisfied with their ESG-related efforts, they do not believe the outside world understands or appreciates the work they do.
• Directors recognize that tensions exist between shareholder and stakeholder interests. That said,
most believe their companies successfully balance this tension.
• In general, directors reject the view that their companies have a short-term investment horizon in
running their businesses.
In the summer of 2019, the Diligent Institute and the Rock Center for Corporate Governance at Stanford University surveyed nearly 200 directors of public and private corporations globally to better understand how they balance shareholder and stakeholder needs.
by David F. Larcker and Brian Tayan, Stanford Closer Look Series, October 7, 2019
A reliable system of corporate governance is considered to be an important requirement for the long-term success of a company. Unfortunately, after decades of research, we still do not have a clear understanding of the factors that make a governance system effective. Our understanding of governance suffers from 1) a tendency to overgeneralize across companies and 2) a tendency to refer to central concepts without first defining them. In this Closer Look, we examine four central concepts that are widely discussed but poorly understood.
We ask:
• Would the caliber of discussion improve, and consensus on solutions be realized, if the debate on corporate governance were less loosey-goosey?
• Why can we still not answer the question of what makes good governance?
• How can our understanding of board quality improve without betraying the confidential information that a board discusses?
• Why is it difficult to answer the question of how much a CEO should be paid?
• Are U.S. executives really short-term oriented in managing their companies?
David F. Larcker, Brian Tayan, Vinay Trivedi, and Owen Wurzbacher, Stanford Closer Look Series, July 2, 2019
Currently, there is much debate about the role that non-investor stakeholder interests play in the governance of public companies. Critics argue that greater attention should be paid to the interest of stakeholders and that by investing in initiatives and programs to promote their interests, companies will create long-term value that is greater, more sustainable, and more equitably shared among investors and society. However, advocacy for a more stakeholder-centric governance model is based on assumptions about managerial behavior that are relatively untested. In this Closer Look, we examine survey data of the CEOs and CFOs of companies in the S&P 1500 Index to understand the extent to which they incorporate stakeholder needs into the business planning and long-term strategy, and their view of the costs and benefits of ESG-related programs.
We ask:
• What are the real costs and benefits of ESG?
• How do companies signal to constituents that they take ESG activities seriously?
• How accurate are the ratings of third-party providers that rate companies on ESG factors?
• Do boards understand the short- and long-term impact of ESG activities?
• Do boards believe this investment is beneficial for the company?
By David F. Larcker, Brian Tayan, Vinay Trivedi and Owen Wurzbacher, CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance, July 2019
In spring 2019, the Rock Center for Corporate Governance at Stanford University surveyed 209 CEOs and CFOs of companies included in the S&P 1500 Index to understand the role that stakeholder interests play in long-term corporate planning.
Key Findings
• CEOs Are Divided On Whether Stakeholder Initiatives Are A Cost or Benefit to the Company
• Companies Tout Their Efforts But Believe the Public Doesn’t Understand Them
• Blackrock Advocates … But Has Little Impact
By David F. Larcker, Brian Tayan
Core Concepts Series. Corporate Governance Research Initiative, June 2019
A roadmap to understanding the fundamental concepts of corporate governance based on theory, empirical research, and data. This guide will take an in-depth look at Shareholders and Activism.
By Brandon Boze, Margarita Krivitski, David F. Larcker, Brian Tayan, and Eva Zlotnicka
Stanford Closer Look Series
May 23, 2019
Recently, there has been debate among corporate managers, board of directors, and institutional investors around how best to incorporate ESG (environmental, social, and governance) factors into strategic and investment decision-making processes. In this Closer Look, we examine a framework informed by the experience of ValueAct Capital and include case examples.
We ask:
• What is the investment horizon prevalent among most companies today?
• Do companies miss long-term opportunities because of a focus on short-term costs?
• How many companies have an opportunity to profitably invest in ESG solutions?
• What factors determine whether a company can profitably invest in ESG solutions?
• Can investors earn competitive risk-adjusted returns through ESG investments?
• If so, how widespread is this opportunity?
This Research Spotlight provides a summary of the academic literature on environmental, social, and governance (ESG) activities including:
• The relation between ESG activities and firm value
• The impact of environmental and social engagements on firm performance
• The market reaction to ESG events
• The relation between ESG and agency problems
• The performance of socially responsible investment (SRI) funds
This Research Spotlight expands upon issues introduced in the Quick Guide “Investors and Activism”.
By Courtney Hamilton, David F. Larcker, Stephen A. Miles, and Brian Tayan, Stanford Closer Look Series, February 15, 2019
Two decades ago, McKinsey advanced the idea that large U.S. companies are engaged in a “war for talent” and that to remain competitive they need to make a strategic effort to attract, retain, and develop the highest-performing executives. To understand the contribution of the human resources department to company strategy, we surveyed 85 CEOs and chief human resources officers at Fortune 1000 companies. In this Closer Look, we examine what these senior executives say about the contribution of HR to the strategic efforts and financial performance of their companies.
We ask:
• What role does HR play in the development of corporate strategy?
• Does HR have an equal voice or is it junior to other members of the senior management team?
• Do boards see HR and human capital as critical to corporate performance?
• How do boards ascertain whether management has the right HR strategy?
• How adept are companies at using data from HR systems to learn what programs work and why?
By David F. Larcker and Brian Tayan, Stanford Closer Look Series, December 3, 2018
Companies are required to have a reliable system of corporate governance in place at the time of IPO in order to protect the interests of public company investors and stakeholders. Yet, relatively little is known about the process by which they implement one. This Closer Look, based on detailed data from a sample of pre-IPO companies, examines the process by which companies go from essentially having no governance in place at the time of their founding to the fully established systems of governance required of public companies by the Securities and Exchange Commission. We examine the vastly different choices that companies make in deciding when and how to implement these standards.
We ask:
• What factors do CEOs and founders take into account in determining how to implement governance systems?
• Should regulators allow companies greater flexibility to tailor their governance systems to their specific needs?
• Which elements of governance add to business performance and which are done only for regulatory purposes?
• How much value does good governance add to a company’s overall valuation?
• When should small or medium sized companies that intend to remain private implement a governance system?
By David F. Larcker, Brian Tayan, CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance, November 2018
In summer and fall 2018, the Rock Center for Corporate Governance at Stanford University surveyed 53 founders and CEOs of 47 companies that completed an Initial Public Offering in the U.S. between 2010 and 2018 to understand how corporate governance practices evolve from startup through IPO.
David F. Larcker, Stephen A. Miles, Brian Tayan, and Kim Wright-Violich
Stanford Closer Look Series, November 8, 2018
CEO activism—the practice of CEOs taking public positions on environmental, social, and political issues not directly related to their business—has become a hotly debated topic in corporate governance. To better understand the implications of CEO activism, we examine its prevalence, the range of advocacy positions taken by CEOs, and the public’s reaction to activism.
We ask:
• How widespread is CEO activism?
• How well do boards understand the advocacy positions of their CEOs?
• Are boards involved in decisions to take public stances on controversial issues, or do they leave these to the discretion of the CEO?
• How should boards measure the costs and benefits of CEO activism?
• How accurately can internal and external constituents distinguish between positions taken proactively and reactively by a CEO?
By David F. Larcker, Brian Tayan, CGRI Survey Series. Corporate Governance Research Initiative, Stanford Rock Center for Corporate Governance, October 2018
In summer and fall 2018, the Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 3,544 individuals — representative by gender, race, age, household income, and state residence — to understand how the American public views CEOs who take public positions on environmental, social, and political issues.
“We find that the public is highly divided about CEOs who take vocal positions on social, environmental, or political issues,” says Professor David F. Larcker, Stanford Graduate School of Business. “While some applaud CEOs who speak up, others strongly disapprove. The divergence in opinions is striking. CEOs who take public positions on specific issues might build loyalty with their employees or customers, but these same positions can inadvertently alienate important segments of those populations. The cost of CEO activism might be higher than many CEOs, companies, or boards realize.”
“Hot-button issues are hot for a reason,” adds Brian Tayan, researcher at Stanford Graduate School of Business. “Interestingly, people are much more likely to think of products they have stopped using than products they have started using because of a position the CEO took on a public issue. When consumers don’t like what they hear, they react the best way they know how to: by closing their wallets.”
By David F. Larcker, Brian Tayan, CGRI Quick Guide Series. Corporate Governance Research Initiative, September 2018
This guide provides data and statistics on the attributes of the CEOs and CEO succession events at publicly traded companies in the United States. This data supplements the issues introduced in the Quick Guide “CEO Succession Planning.”
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Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
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Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
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Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
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Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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CEO Pay Levels Research Spotlight
1. David F. Larcker and Brian Tayan
Corporate Governance Research Initiative
Stanford Graduate School of Business
CEO PAY LEVELS
RESEARCH SPOTLIGHT
2. KEY CONCEPTS
CEO compensation is a highly controversial subject.
Two theories exist to explain current levels of pay in the U.S.
1. Optimal contracting.
– CEO compensation is awarded through an efficient process, driven by
competitive market forces.
– Boards negotiate pay through an arms-length negotiation in the best interest
of the shareholders.
– Pay differentials between the CEO and senior executives provide incentive for
managers to perform by offering large rewards in the event of promotion
(“tournament theory”).
3. KEY CONCEPTS
2. Rent extraction.
– CEO compensation is not the result of an efficient economic process.
– CEOs exert influence over boards to extract compensation in excess of what
would be awarded in a competitive market.
– Large pay differentials between the CEO and senior executives are indicative of
rent-seeking behavior.
• Research evidence is mixed but generally favors the optimal contracting view
of CEO compensation.
4. CEO PAY LEVELS
• Gabaix and Landier (2008) develop an economic model to examine the
relation between CEO pay and company size.
• Sample: S&P 500 companies, 1971-2004.
• Find that changes in CEO pay are almost entirely explained by changes in
company size.
• Six-fold increase in company size 1980-2003 led to six-fold increase in pay.
• Conclusion: Company size is the largest determinant of CEO pay levels.
“In our equilibrium model, the best CEOs manage the largest
firms, as this maximizes their impact and economic efficiency.”
5. CEO PAY LEVELS
• Kaplan and Rauh (2010) examine compensation trends among CEOs and
other highly paid professionals.
• Sample includes four groups of professionals, 1994-2004.
1. CEOs of S&P 1500 firms.
2. Investment bankers, hedge fund managers, and private equity managers.
3. Lawyers.
4. Professional athletes and celebrities.
• Find that growth in CEO pay is consistent with growth in other pay groups.
• Conclusion: CEO pay is driven by market forces.
“The evidence is more consistent with theories of skill-biased
technological change, superstars, greater scale, and their interaction.”
6. CEO PAY LEVELS
• Frydman and Jenter (2010) conduct a comprehensive review of the academic
research on CEO compensation.
• Sample: U.S. public companies, 1930s through 2005.
• Observe two distinct trends:
– Pre-1970s: low pay, little dispersion across firms, moderate pay-for-performance.
– 1970s-2005: large pay growth, more dispersion, closer pay-for-performance.
• Find support for two explanations:
– Optimal contracting: competitive market forces set CEO pay
– Rent extraction: CEO influence over board allows CEOs to extract excessive pay.
• Conclusion: Pay is potentially driven by both market forces and CEO power.
7. CEO PAY LEVELS
• Murphy (2012) conducts an extensive review of historical trends in CEO
compensation.
• Sample: U.S. public companies, 1930s through 2010.
• Finds that CEO compensation size and structure are heavily influenced by
regulatory and tax-law changes.
• Government rules directly impact the relative attractiveness of cash, stock
options, restricted stock, and performance-based awards in CEO pay.
• Conclusion: CEO pay is shaped by tax, accounting, and legislative rules.
“Government intervention has been both a response to and a major
driver of time trends in executive compensation over the past century.”
8. CEO PAY AND GOVERNANCE QUALITY
• Core, Holthausen, and Larcker (1999) examine the relations between CEO
compensation, governance quality, and performance.
• Sample: 205 firms, 1982-1984.
• Find that:
– CEO pay levels are inversely related to several measures of board oversight
(independence, outside representation, and external block ownership).
– Companies that award excess pay underperform over subsequent 1-, 3-, and 5-year
periods (ROA and stock price).
• Conclusion: Poor governance negatively impacts pay and performance.
“Overall, our results suggest that firms with weaker governance structures have greater
agency problems; that CEOs at firms with greater agency problems receive greater
compensation; and that firms with greater agency problems perform worse.”
9. PAY DIFFERENTIAL BETWEEN CEO AND OTHER EXECUTIVES
• Kale, Reis, and Venkateswaran (2009) examine the relation between pay
differentials in the C-suite and firm performance.
• Sample: S&P 1500 companies, 1993-2004.
• Hypothesize that large pay differentials provide incentive for senior
managers to perform and earn promotion (“tournament theory”).
• Find that gaps between CEO and senior executive pay are positively
correlated with performance (measured as ROA and Tobin’s Q).
• Conclusion: Large pay differentials reflect economic incentives.
“Our analysis indicates that a rank-order tournament that provides promotion incentives
to mangers is an important incentive mechanism for motivating corporate managers.”
10. PAY DIFFERENTIAL BETWEEN CEO AND OTHER EXECUTIVES
• Bebchuk, Cremers, and Peyer (2011) study the relation between pay
differentials and governance quality.
• Sample: 2,015 companies, 3,256 CEOs, 1993-2004.
• Evaluate the relation between “pay slice” (the fraction of aggregate pay for top
five named executive officers that is paid to the CEO) and various outcomes.
• Find that “pay slice” is negatively associated with firm value (Tobin’s Q) and
positively associated with governance problems.
• Conclusion: Large pay differentials reflect CEO rent extraction.
“Excess [pay slice]… reflects rents captured by the CEO and can
be viewed as a product of agency (governance) problems.”
11. PAY DIFFERENTIAL BETWEEN CEO AND OTHER EXECUTIVES
• Kini and Williams (2012) study the relation between pay differentials and risk.
• Sample: 19,333 firm-year observations, 1994-2009.
• Hypothesize that higher pay gaps between the CEO and senior executives
give senior executives greater incentive to take risk in order to increase their
chance of promotion.
• Find that pay differentials are positively associated with firm risk (measured
by leverage, operating focus, and R&D investment).
• Conclusion: Large pay differentials increase firm risk.
“While the design of a promotion-based incentive system can be
employed to induce senior executives to expend greater effort, it
can also be used to shape the amount of risk taken by them.”
12. PEER GROUPS AND CEO PAY
• Bizjak, Lemmon, and Naveen (2008) study whether firms selectively include
companies in their peer group to inflate CEO pay.
• Sample: 15,329 firm-year observations, 1992-2005.
• Find that:
– CEOs paid below median receive larger increases than CEOs paid above median.
– CEOs with short tenure and better performance receive larger pay increases.
– CEOs with larger pay increases face higher rates of turnover.
– No evidence that large pay increases are associated with poor governance quality.
• Conclusion: Peer groups are used to set competitive pay.
“Benchmarking is a practical and efficient mechanism used to
gauge the market wage necessary to retain valuable human capital.”
13. PEER GROUPS AND CEO PAY
• Faulkender and Yang (2010) also study the impact of peer-group selection
on CEO compensation.
• Sample: 657 companies, 2006-2007.
– First year the SEC required that companies disclose peer group.
• Find that:
– Companies choose peers with above-average CEO pay (controlling for all else).
– This effect is stronger in firms where CEO has more power (i.e., CEO is chairman
or is long-tenured) and where directors are busy serving on multiple boards.
• Conclusion: Peer groups are selected to inflate pay.
“Compensation committees seem to be endorsing compensation peer groups
that include companies with higher CEO compensation… possibly because
such peer companies enable justification of the higher level of their CEO pay.”
14. COMPENSATION CONSULTANTS AND CEO PAY
• Conyon, Peck, and Sadler (2009) examine whether the use of
compensation consultants lead to higher CEO pay.
– Sample: 400 U.S. companies, 2006; 231 U.K. companies, 2003.
– Find that CEO pay is higher in companies that use a consultant but no evidence
that higher pay is due to conflicts of interest.
• Cadman, Carter, and Hillegeist (2010) also examine the use of
compensation consultants.
– Sample: 755 S&P 1500 companies, 2006.
– Find no evidence that conflicts lead to higher pay or lower pay-for-performance
sensitivities.
• Conclusion: Compensation consultants do not inflate CEO pay.
15. COMPENSATION CONSULTANTS AND CEO PAY
• Murphy and Sardino (2010) examine whether CEO pay is higher when the
consultant is retained by management or by the board.
– Sample: 1,341 companies, 2006.
– Find (unexpectedly) that CEO pay is higher when the consultant is hired by the
board.
• Chu, Faase, and Rau (2014) also examine the relation between CEO pay and
the appointment decision.
– Sample: 1,051 companies, 2006-2012.
– Find that CEO pay is 12.9% lower among firms where compensation consultant
is retained solely by the board.
• Conclusion: Uncertain whether compensation consultants are subject to
CEO influence.
16. COMPENSATION CONSULTANTS AND CEO PAY
• Armstrong, Ittner, and Larcker (2012) study the associations between
compensation consultants, CEO pay, and governance quality.
• Sample: 2,110 companies, 2006.
• Find that CEO pay is higher in firms with weaker governance (measured by
several board attributes) and that firms with weaker governance are more
likely to use compensation consultants.
• Find no evidence that pay levels differ after controlling for differences in
governance quality.
• Conclusion: CEO pay levels are influenced by governance, not consultants.
“Using propensity scoring methods to match firms on both economic and governance
characteristics, we find no significant pay differences in consultant users and non-users.”
17. CONCLUSION
• Research evidence on CEO compensation suggests that pay is generally set
through an efficient economic process; however, situations exist where
poor governance leads to rent extraction.
• Large pay differentials between the CEO and senior managers generally
reflect economic incentives to perform.
• Research on peer group selection provides limited evidence that the choice
of peer group members are used to inflate pay.
• Research generally does not show that CEOs benefit by receiving inflated
pay from compensation consultants.
• Shareholders should evaluate CEO pay contracts within the context of the
company’s strategy, performance, and governance structure.
18. BIBLIOGRAPHY
Xavier Gabaix and Augustin Landier. Why Has CEO Pay Increased So Much? Quarterly Journal of Economics. 2008.
Steven N. Kaplan and Joshua Rauh. Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes? Review of
Financial Studies 2010.
Carola Frydman and Dirk Jenter. CEO Compensation. Social Science Research Network. 2010.
Kevin Murphy. Executive Compensation: Where We Are and How We Got There. Social Science Research Network. 2012.
John E. Core, Robert W. Holthausen, and David F. Larcker. Corporate Governance, Chief Executive Officer Compensation, and Firm
Performance. Journal of Financial Economics. 1999.
Jayant R. Kale, Ebru Reis, and Anand Venkateswaran. Rank-Order Tournaments and Incentive Alignment: The Effect on Firm
Performance. Journal of Finance. 2009.
Lucian A. Bebchuk, K. J. Martijn Cremers, and Urs C. Peyer. The CEO Pay Slice. Journal of Financial Economics. 2011.
Omesh Kini and Ryan Williams. Tournament Incentives, Firm Risk, and Corporate Policies. Journal of Financial Economics. 2012.
John M. Bizjak, Michael L. Lemmon, and Lalitha Naveen. Does the Use of Peer Groups Contribute to Higher Pay and Less Efficient
Compensation? Journal of Financial Economics. 2008.
Michael Faulkender and Jun Yang. Inside the Black Box: The Role and Composition of Compensation Peer Groups. Journal of
Financial Economics. 2010.
19. BIBLIOGRAPHY
Martin J. Conyon, Simon I. Peck, and Graham V. Sadler. Compensation Consultants and Executive Pay: Evidence from the United
States and the United Kingdom. Academy of Management Perspectives. 2009.
Brian Cadman, Mary Ellen Carter, and Stephen Hillegeist. The Incentives of Compensation Consultants and CEO Pay. Journal of
Accounting and Economics. 2010.
Kevin J. Murphy and Tatiana Sandino. Executive Pay and ‘Independent’ Compensation Consultants, Journal of Accounting and
Economics. 2010.
Jenny Chu, Jonathan Faasse, and P. Raghavendra Rau. Do Compensation Consultants Enable Higher CEO Pay? New Evidence from
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Chris S. Armstrong, Christopher D. Ittner, and David F. Larcker. Corporate Governance, Compensation Consultants, and CEO Pay
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