Posits that most studies have found a significant, yet weak, link between the compensation of the CEO and the company’s performance. Herein extends research by focusing on an…
Abstract
Posits that most studies have found a significant, yet weak, link between the compensation of the CEO and the company’s performance. Herein extends research by focusing on an individual industry, building a model using only data from healthcare organisations. This article tests the relationship using data from 23 healthcare organisations.
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Academics believe that shareholder and management interests can be productively aligned by directly linking CEO compensation to firm performance (Abowd [1990], Agrawal & Mankelder…
Abstract
Academics believe that shareholder and management interests can be productively aligned by directly linking CEO compensation to firm performance (Abowd [1990], Agrawal & Mankelder [1987], Lewellen, Loderer & Martin [1987], and Haugen & Senbet [1981]). Stockholders prefer CEOs pursuing strategies that maximise risk adjusted stock returns, but CEOs are assumed to be interested in strategies that maximise their personal wealth. If rewarded through their pay packages to increase the size of the firm, CEOs may overgrow the firm at shareholder expense to reach that end.
Outlines the difficulty of retaining new employees covering the problems, costs and methods used to retain productive employees. Suggests that there is often insufficient data…
Abstract
Outlines the difficulty of retaining new employees covering the problems, costs and methods used to retain productive employees. Suggests that there is often insufficient data regarding initial employee performance and the lack of incentives for better performers who are often treated equally with under performers. Considers the costs and benefits of using employment agencies. Briefly considers the use of pay as an incentive, including bonuses and stock ownership and job satisfaction through good job design to increase variety.
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Explains the new US tax rules for calculating the required minimum distributions from employer‐sponsored qualified retirement plans, 403(b) plans and individual retirement…
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Explains the new US tax rules for calculating the required minimum distributions from employer‐sponsored qualified retirement plans, 403(b) plans and individual retirement accounts, pointing out that when the owner of a tax‐deferred retirement account dies the beneficiary of the fund becomes liable for tax. Gives numerical examples to illustrate the application of the rules.
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Kevin J. Sigler and William H. Sackley
This paper studies the relationship between NBA players’ salaries and their performance on the basketball court. In other industries executive compensation has been found to have…
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This paper studies the relationship between NBA players’ salaries and their performance on the basketball court. In other industries executive compensation has been found to have a weak yet significant link to company performance. We find a positive and significant relationship between an NBA player’s salary and a player’s points per game and rebounds per game for 1997‐98 basketball season. These results may be improved by considering qualitative factors and including more years of data.
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Outlines some research on the effects of risk on portfolios for retirement planning and puts forward a method to help individuals “increase their chances of not outliving their…
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Outlines some research on the effects of risk on portfolios for retirement planning and puts forward a method to help individuals “increase their chances of not outliving their retirement portfolios”. Uses numerical examples to show how calculations of the savings needed to achieve specific retirement incomes may prove inaccurate, and how regular portfolio assessment can be used to make any necessary adjustments during the accumulation and/or the retirement stage.
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Kevin J. Sigler and Joseph P. Haley
This paper examines the link between CEO cash compensation and company performance. We test for the influence of CEO pay on firm performance over a cross section of companies…
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This paper examines the link between CEO cash compensation and company performance. We test for the influence of CEO pay on firm performance over a cross section of companies applying the same approach that is used by Lewellen, Loderer, Martin and Blum [1992]. In our study we account for the degree of common stock ownership by the CEO of each company as well. We find a positive and significant connection between the pay of CEOs and the performance of their respective firms. From our results it appears that CEO pay is used to align the interests of shareholders with company CEOs, reducing agency costs within the firm.
Kevin J. Sigler and Thomas Cornwell
Explores a US bank CEO’s ideal compensation package as a way of attracting and retaining talented individuals. States that there must be a competitive base salary but that total…
Abstract
Explores a US bank CEO’s ideal compensation package as a way of attracting and retaining talented individuals. States that there must be a competitive base salary but that total compensation should include car, housing, retirement and health benefits., and stock options. Notes that the federal tax package has placed a limit on eligible compensation and mentions supplemental executive retirement plans (SERPS) as a way of compensating for this. Links pay with bank performance; the CEO’s cash bonuses are tied to the bank’s performance to ensure that the CEO acts in the best interests of the bank and its shareholders. Observes fluctuations in total compensation packages due to tenure, returns on average assets, bank revenues and net incomes or profits of the bank.
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Joseph D. Haley and Kevin J. Sigler
During the spring and early summer of 1991 the life insurance industry experienced an unprecedented series of major life insurer insolvencies. The objective of this paper is to…
Abstract
During the spring and early summer of 1991 the life insurance industry experienced an unprecedented series of major life insurer insolvencies. The objective of this paper is to determine whether or not policyholder panic resulted from these failures. The analysis shows that each of the failed companies which are evaluated had unique financial problems which caused their demise. And through the use of an event study methodology it is concluded that industry‐wide policyholder panic did not occur as a result of the life insurer failures.
The purpose of this paper is to discuss how executive stock options help in reducing agency costs in the firm and to address problems experienced by the firm when stock options…
Abstract
Purpose
The purpose of this paper is to discuss how executive stock options help in reducing agency costs in the firm and to address problems experienced by the firm when stock options are used as incentives.
Design/methodology/approach
The paper initially discusses types of agency problems caused by company managers and then explains why stock options can reduce the problem of excessive risk aversion displayed by some managers. It then addresses the problems that may occur with the introduction of executive stock options by the firm and finally offers methods to reduce these problems.
Findings
The paper explains the methods available to reduce the problems caused by executive stock options such as indexing the stock options to the S&P 500 index and structuring the Board of Directors in a manner that helps ensure the stock options are used appropriately.
Originality/value
This paper is valuable to firms using executive stock options as incentives to managers. It outlines the problems stock options can help solve and the problems which may occur by their use. In addition, the ways to reduce the problems produced by executive stock options in the firm are discussed.