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UK Executive Bonuses and Transparency — A Research Note

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Listed:
  • Jay Fattorusso
  • Rodion Skovoroda
  • Trevor Buck
  • Alistair Bruce

Abstract

High levels of executive pay in the USA and the UK have attracted journalistic and academic criticism to the effect that they constitute rent extraction by self‐interested executives rather than rewards for raising shareholder returns. The focus of most criticism has been on salary, severance payments and various long‐term incentives (particularly share options). However, executive bonuses have attracted little attention and have been only lightly regulated. This raises important questions. Has lighter regulation been associated with significant levels of rent extraction through bonuses, that is, a weak relation between bonus pay and shareholder returns? Have more transparent performance conditions attached to bonuses strengthened the relation, making rent extraction more difficult, or have they acted as camouflage for rent extraction, associated with higher bonus pay but lower pay‐performance responsiveness? Are measures of CEO power associated with larger bonuses? This empirical note provides the first, preliminary answers to these questions.

Suggested Citation

  • Jay Fattorusso & Rodion Skovoroda & Trevor Buck & Alistair Bruce, 2007. "UK Executive Bonuses and Transparency — A Research Note," British Journal of Industrial Relations, London School of Economics, vol. 45(3), pages 518-536, September.
    • Handle: RePEc:bla:brjirl:v:45:y:2007:i:3:p:518-536
    DOI: 10.1111/j.1467-8543.2007.00626.x
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    References listed on IDEAS

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    1. Paul Gregg & Sarah Jewell & Ian Tonks, 2010. "Executive Pay and Performance in the UK," FMG Discussion Papers dp657, Financial Markets Group.
    2. Paul Gregg & Sarah Jewell & Ian Tonks, 2005. "Executive Pay and Performance in the UK 1994-2002," The Centre for Market and Public Organisation 05/122, The Centre for Market and Public Organisation, University of Bristol, UK.
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    Cited by:

    1. Gregory Heem, 2010. "Les critères de détermination de la part variable de la rémunération des dirigeants du CAC 40," Post-Print hal-00476935, HAL.
    2. Hristos Doucouliagos & Janto Haman & T.D. Stanley, 2012. "Pay for Performance and Corporate Governance Reform," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(3), pages 670-703, July.
    3. Ian Gregory-Smith & Brian G. M. Main, 2016. "Testing the Participation Constraint in the Executive Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(4), pages 399-426, September.

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