IDEAS home Printed from https://ideas.repec.org/a/taf/acctbr/v36y2006i3p191-205.html
   My bibliography  Save this article

The ABI guidelines for share-based incentive schemes: setting the hurdle too high?

Author

Listed:
  • Brian Main

Abstract

This paper examines, from (he perspective of the pay-performance connection, the guideline principles issued since 1984 by the Association of British Insurers (ABI) in connection with the operation of share-based incentive schemes for executives. In particular, attention is paid to the marked change in emphasis that emerged in the 1999 guidelines. The four main dimensions to these guidelines concern: (i) phasing of issue by use of regular awards; (ii) setting of performance criteria (hurdles) against a peer group or bench-mark; (iii) restricting any re-testing of satisfaction of such performance criteria; and (iv) instituting a sliding scale of reward contingent on the performance out-turn against criteria. Results are derived from a simulation over a 14 year period of the implementation of such guidelines in a sample of companies traded on the London Stock Exchange. Empirical results suggest that the pay-performance connection is not always made stronger by setting the hurdle ever higher, and that higher hurdles are best tempered by some latitude in terms of re-testing. The results also highlight the importance of the choice of method of reporting the performance of Executive Share Options when communicating with shareholders and other stakeholders.

Suggested Citation

  • Brian Main, 2006. "The ABI guidelines for share-based incentive schemes: setting the hurdle too high?," Accounting and Business Research, Taylor & Francis Journals, vol. 36(3), pages 191-205.
  • Handle: RePEc:taf:acctbr:v:36:y:2006:i:3:p:191-205
    DOI: 10.1080/00014788.2006.9730021
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00014788.2006.9730021
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/00014788.2006.9730021?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. M. Ali Choudhary & J. Michael Orszag, 2003. "Are Performance Conditions On Executive Options Driven By Fundamentals?," School of Economics Discussion Papers 1103, School of Economics, University of Surrey.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Lisa Shifei & Stark, Andrew W., 2009. "Relative performance evaluation in board cash compensation: UK empirical evidence," The British Accounting Review, Elsevier, vol. 41(1), pages 21-30.
    2. Voulgaris, Georgios & Stathopoulos, Konstantinos & Walker, Martin, 2014. "IFRS and the Use of Accounting-Based Performance Measures in Executive Pay," The International Journal of Accounting, Elsevier, vol. 49(4), pages 479-514.
    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jerry Coakley & Stavroula Iliopoulou, 2006. "Bidder CEO and Other Executive Compensation in UK M&As," European Financial Management, European Financial Management Association, vol. 12(4), pages 609-631, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:acctbr:v:36:y:2006:i:3:p:191-205. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RABR20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.