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Onwards and Upwards: why companies change their executive remuneration schemes, and why this leads to increases in pay

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  • Ruth Bender

Abstract

This paper reports interview‐based research examining reasons for the continued increase in executive directors' remuneration in large UK companies. This issue has not specifically been addressed by previous studies, which have focused on the level of the increases, rather than their underlying explanations. Reasons given for making changes included: increases due to being below‐market; changing performance‐related schemes that did not pay out or paid less than expected; changes in the company's culture or strategy; changes to senior personnel; and compliance with good practice in human resource management and in corporate governance. The results are analysed through two theoretical lenses. Agency theory provides an explanation of the structure of the contracts; expectancy theory suggests why schemes might be changed to motivate the executives.

Suggested Citation

  • Ruth Bender, 2007. "Onwards and Upwards: why companies change their executive remuneration schemes, and why this leads to increases in pay," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(5), pages 709-723, September.
    • Handle: RePEc:bla:corgov:v:15:y:2007:i:5:p:709-723
    DOI: 10.1111/j.1467-8683.2007.00609.x
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    References listed on IDEAS

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    1. Jeff Coulton & Stephen Taylor, 2004. "Directors' Duties and Corporate Governance: Have We Gone Too Far?," Australian Accounting Review, CPA Australia, vol. 14(32), pages 17-24, March.
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    Cited by:

    1. Hien Thi Thuc Nguyen & Subhan Ullah & Hanh Thi My Le & Affan Hameed, 2023. "Sustainability Targets in Executive Remuneration Contracts and Corporate Sustainability Performance in the United Kingdom and European Union," Environment Systems and Decisions, Springer, vol. 43(3), pages 393-415, September.
    2. Pochara Arayakarnkul & Pattanaporn Chatjuthamard & Suntharee Lhaopadchan & Sirimon Treepongkaruna, 2022. "Corporate governance, board connections and remuneration," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(4), pages 795-808, July.
    3. Pochara Arayakarnkul & Pattanaporn Chatjuthamard & Sirimon Treepongkaruna, 2022. "Board gender diversity, corporate social commitment and sustainability," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1706-1721, September.
    4. Brian G. M. Main & Calvin Jackson & John Pymm & Vicky Wright, 2008. "The Remuneration Committee and Strategic Human Resource Management," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(3), pages 225-238, May.
    5. Joaquim Vergés, 2010. "Incentive schemes for executive officers when forecasts matter," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 339-352.
    6. Zakaria, Idlan, 2012. "Performance measures, benchmarks and targets in executive remuneration contracts of UK firms," The British Accounting Review, Elsevier, vol. 44(3), pages 189-203.
    7. Elnahass, Marwa & Salama, Aly & Trinh, Vu Quang, 2022. "Firm valuations and board compensation: Evidence from alternative banking models," Global Finance Journal, Elsevier, vol. 51(C).

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