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CEO pay in UK FTSE 100: pay inequality, board size and performance

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  • William Patrick Forbes
  • Michael Pogue
  • Lynn Hodgkinson

Abstract

In this paper we examine the costs of seemingly excessive pay awards to CEOs within the UK FTSE 100 in the last decade and the consequent growth in executive pay inequality. In presenting this evidence we describe variations in the whole distribution of executive pay, rather than invoking some arbitrary cut-off point, to determine how changes in shareholder value match with concurrent changes in the distribution of executive pay. We ask whether the impact of executive pay inequality is a function of board size, rendering the CEO pay slice measure problematic in this context? We then question whether the interaction of board size and corporate performance, as measured by shareholder returns, explain variations in the sensitivity of the pay--performance relationship for UK FTSE 100 executives. We advance the Gini coefficient as a preferable measure of executive pay inequality in order to capture the impact of perceived inequality upon corporate performance.

Suggested Citation

  • William Patrick Forbes & Michael Pogue & Lynn Hodgkinson, 2016. "CEO pay in UK FTSE 100: pay inequality, board size and performance," The European Journal of Finance, Taylor & Francis Journals, vol. 22(8-9), pages 712-731, July.
    • Handle: RePEc:taf:eurjfi:v:22:y:2016:i:8-9:p:712-731
    DOI: 10.1080/1351847X.2014.885457
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    Cited by:

    1. Li, Guangqin & Shao, Shuai & Zhang, Lihong, 2019. "Green supply chain behavior and business performance: Evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 144(C), pages 445-455.
    2. Zain UI Abideen & Zeeshan Ahmed & Huan Qiu & Yiwei Zhao, 2023. "Do Behavioral Biases Affect Investors’ Investment Decision Making? Evidence from the Pakistani Equity Market," Risks, MDPI, vol. 11(6), pages 1-32, June.

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