Corporate Governance and the CEO Pay-Performance Link: Australian Evidence
International Review of Finance, Vol. 13, 2013
26 Pages Posted: 2 Aug 2010 Last revised: 24 Apr 2014
Date Written: February 12, 2013
Abstract
We examine the influence of corporate governance mechanisms, namely blockholdings and board structure, on CEO pay-performance sensitivity in listed Australian firms. Results highlight blockholders’ role in shaping observed pay-performance associations and their impact varying with their independence and relative magnitude of ownership. Monitoring blockholders increase the sensitivity of long-term at-risk pay to performance, better aligning manager and shareholder interests. However, consistent with a shorter investment horizon, insider blockholders increase (decrease) the responsiveness of cash bonuses (long-term at-risk pay). Finally, consistent with them affording less effective monitoring, larger boards raise (lower) the sensitivity of known pay (long-term at-risk pay) to performance.
Keywords: Executive Compensation, Pay-Performance, Corporate Governance, Ownership Concentration, Blockholder, Board of Directors, Australia
JEL Classification: G30
Suggested Citation: Suggested Citation
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