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Performance Based Compensation for Real Estate Executives

Author

Listed:
  • Liesa Schrand
  • Claudia Ascherl
  • Wolfgang Schaefers

Abstract

Worldwide there are various norms in establishing senior executive including the Chief Executive Officer’s (CEO) compensation packages, with various academics trying to desegregate and shade some light on such a confidential side of our business world. The agency theory (Berle and Means 1932; Jensen and Meckling 1976) seems to be key in the justification of the business norms aligning the interests of executive management to those of investors in order to create long-term value and profit (Bebchuk and Fried 2003). Senior executive compensation entails agency costs which have to be paid, in order to reduce information asymmetries between shareholders and management (Tosi et al. 2000). Our study explores the constituent list of the FTSE/NAREIT United States Index from 2005 till 2015. The sensitivity of executive compensation to financial performance measurement variables is examined by applying a panel-data analysis, which includes executive compensation (ExecuCompustat) and financial performance (Thomson Reuters Datastream and SNL). This study yields information on how the compensation of executive management and CEOs in the real estate sector in the US is structured and how the compensation is influenced by the financial performance. This paper is the first to provide basic advice on how to design a management compensation system for listed real estate companies after the financial crisis with the purpose of management alignment to shareholders.

Suggested Citation

  • Liesa Schrand & Claudia Ascherl & Wolfgang Schaefers, 2018. "Performance Based Compensation for Real Estate Executives," ERES eres2018_135, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2018_135
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    More about this item

    Keywords

    Agency Theory; CEO Compensation; CEO Power; Executive Compensation; Performance;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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