Towards a Set of Design Principles for Executive Compensation Contracts

Shan, Y; Walter, T

Towards a Set of Design Principles for Executive Compensation Contracts

Shan, Y

Walter, T

Permalink

Publication Type:: Journal Article
Citation:: Abacus, 2016, 52 (4), pp. 619 - 684
Issue Date:: 2016-12-01

Closed Access

	Filename	Description	Size
	Shan_et_al-2016-Abacus.pdf	Published Version	2.81 MB	Adobe PDF	View/Open

Copyright Clearance Process

Recently Added
In Progress
Closed Access

This item is closed access and not available.

Full metadata record

Field	Value	Language
dc.contributor.author	Shan, Y https://orcid.org/0000-0003-2156-8722	en_US
dc.contributor.author	Walter, T	en_US
dc.date.available	2015-06-22	en_US
dc.date.issued	2016-12-01	en_US
dc.identifier.citation	Abacus, 2016, 52 (4), pp. 619 - 684	en_US
dc.identifier.issn	0001-3072	en_US
dc.identifier.uri	http://hdl.handle.net/10453/118181
dc.description.abstract	© 2016 Accounting Foundation, The University of Sydney Executive compensation has been controversial for many years. Controversies over executive pay have sparked outrage from some sectors and calls for increased regulation and reform. Yet others argue that knee-jerk reactions to perceived abuses of pay can lead to a host of unintended and inefficient outcomes. This paper argues that much of this controversy is due to executives being rewarded via contracts that have weaknesses in design. We argue that few stakeholders in firms would object to generous compensation for managers whose performance results in abnormally high long-term shareholder wealth creation. We state a set of principles, developed from a review of the extensive theoretical, regulatory, and empirical literature, that we offer as fundamental building blocks for designing executive remuneration systems in public firms, especially where ownership and control are separated. Our purpose is to generate broad debate and discussion leading to a consensus as to the principles that should be present in all executive compensation contracts such that the interests of shareholders and managers are more closely aligned.	en_US
dc.relation.ispartof	Abacus	en_US
dc.relation.isbasedon	10.1111/abac.12090	en_US
dc.subject.classification	Accounting	en_US
dc.title	Towards a Set of Design Principles for Executive Compensation Contracts	en_US
dc.type	Journal Article
utslib.citation.volume	4	en_US
utslib.citation.volume	52	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access
pubs.issue	4	en_US
pubs.publication-status	Published	en_US
pubs.volume	52	en_US

Abstract:

© 2016 Accounting Foundation, The University of Sydney Executive compensation has been controversial for many years. Controversies over executive pay have sparked outrage from some sectors and calls for increased regulation and reform. Yet others argue that knee-jerk reactions to perceived abuses of pay can lead to a host of unintended and inefficient outcomes. This paper argues that much of this controversy is due to executives being rewarded via contracts that have weaknesses in design. We argue that few stakeholders in firms would object to generous compensation for managers whose performance results in abnormally high long-term shareholder wealth creation. We state a set of principles, developed from a review of the extensive theoretical, regulatory, and empirical literature, that we offer as fundamental building blocks for designing executive remuneration systems in public firms, especially where ownership and control are separated. Our purpose is to generate broad debate and discussion leading to a consensus as to the principles that should be present in all executive compensation contracts such that the interests of shareholders and managers are more closely aligned.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/118181