Session 189

Antecedents and Consequences of CEO Incentives

Track O

Date: Tuesday, October 6, 2015

 

Time: 17:30 – 18:45

Paper

Room: Governor's Square 9


Session Chair:

  • James Van Scotter II, University of Colorado

Title: And Then There Were None: On the Benefits of Going Optionless

Authors

  • Michelle Zorn, Auburn University
  • Aaron Hill, Oklahoma State University
  • Christine Shropshire, Arizona State University
  • James Combs, University of Central Florida

Abstract: Stock options are traditionally viewed as a governance mechanism to align managerial and shareholder interests. Despite assumptions that stock options serve an important incentive function in CEO compensation, empirical results are equivocal. Further, while they have been heavily used in the past, during our 2006-2012 sample period, more than a quarter of S&P 1500 firms did not grant any options to their CEOs. We develop theory about these optionless firms that suggests that this compensation design cultivates a long-term strategic perspective among managers, improves financial performance, and ensures the viability of the firm. Results support our hypotheses and offer both theoretical and practical insights on corporate governance.

Title: Executive Compensation and Corporate Governance on Bank Failure: Are We Rewarding Failure

Authors

  • Stephen Smulowitz, IESE Business School

Abstract: While the effect of executive compensation and corporate governance on firm risk has been widely studied from an agency perspective, there has been relatively little study of the their effect on actual firm failure. This gap is especially glaring because the prescriptions of agency scholars could have very different effects on firms near failure than on other firms. Using a matched sample of failed and non-failed banks from the period of 2008 to 2014, we theoretically predict and empirically show that the use of variable pay in the form of stock options increases the likelihood of bank failure, while the use of fixed pay in the form of salary and stock decreases the likelihood of failure. We also theoretically predict and empirically show that CEO duality and the existence of a large blockholder increase the likelihood of bank failure.

Title: Governance Trade-Offs: Do Boards Use CEO Severance to INsure New CEOs against Intense Monitoring?

Authors

  • Amanda Cowen, University of Virginia
  • Jeremy Marcel, University of Virginia
  • Adelaide King, University of Virginia

Abstract: CEO severance contracts are often controversial, yet boards insist that they are essential in attracting top talent. Prior research suggests that these contracts help to allay prospective CEOs’ concerns about accepting a position by providing ‘insurance’ against the losses associated with termination. We examine this perspective in the context of a governance environment that has called for more vigilant monitoring of CEOs. Stronger monitoring increases CEOs’ risk of termination, suggesting that boards may be using severance contracts to insure CEOs against organizations’ own governance regimes. We examine this by analyzing the relationship between monitoring intensity and severance adoption. Our findings provide important insight into the unintended consequences of the push for greater CEO accountability.

Title: The Effect of Owners in Setting CEO Incentives

Authors

  • Xavier Castaner, University of Lausanne
  • Nikolaos Kavadis, Carlos III University of Madrid

Abstract: We argue that CEO incentives may be well influenced by the board, but the firm´s owners may also have a direct effect in setting CEO incentives, while the board may have a mediating role in the effect of ownership on CEO incentives. Further, we argue that, in addition to owner monitoring orientation, owner institutional origin is an important determinant of their preferences for managerial incentives. In a sample of large publicly-traded corporations, we find that monitoring orientation and institutional origin have an influence in predicting owner preferences in terms of managerial incentives.

All Sessions in Track O...

Sun: 08:00 – 09:15
Session 40: Strategic Leadership and Governance Expanding: Shifts and New Directions in Research
Sun: 09:45 – 11:00
Session 283: Editor Panel: Publishing Strategic Leadership and Governance Research
Sun: 11:15 – 12:30
Session 38: Big Game Hunting: Accessing and Interacting with Senior Executives for Empirical Research
Sun: 16:15 – 17:30
Session 139: Do Top Managers Matter? Expanding the Focus and Knowledge
Session 147: What Could Strategic IT Governance look like in Smart Cities?
Sun: 17:45 – 00:00
Session 324: Strategic Leadership and Governance Business Meeting
Mon: 08:00 – 09:15
Session 140: New Perspectives on the Outside Director Selection Process
Mon: 11:15 – 12:30
Session 141: Politics as Usual? Political Ideology in the Excutive Suite and Boardroom
Session 220: Perspectives on CEO Compensation
Mon: 13:45 – 15:00
Session 142: Top Management Teams, Senior Executives and Corporate outcomes
Session 215: Personality and Values in Strategic Leadership
Mon: 16:45 – 18:00
Session 216: Blame and Stigma in Response to Poor Orgnizational Outcomes
Session 218: Consequences of Top Management Attitudes and Orientations for the Firm
Tue: 08:00 – 09:15
Session 217: Leadership and Governance in Family Firms
Session 309: Looking Good and Sounding Better: Impression Management by CEOs
Tue: 11:00 – 12:15
Session 145: Strategic Leadership and Corporate Strategy
Session 214: Director Attributes, Director Actions and Director Effectiveness
Tue: 14:15 – 15:30
Session 146: Gender and Diversity in Strategic Leadership and Governance
Tue: 15:45 – 17:00
Session 219: A Tough Crowd: Critical Examinations by Owners and Stakeholders
Tue: 17:30 – 18:45
Session 144: Board Structure: What Works Best?
Session 189: Antecedents and Consequences of CEO Incentives


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