CEO performance targets: The impact of Big 4 accounting firms versus other compensation consultants

Bachmann, RL; Rasool, S; Spiropoulos, H

CEO performance targets: The impact of Big 4 accounting firms versus other compensation consultants

Bachmann, RL Rasool, S Spiropoulos, H

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Publisher:: SAGE PUBLICATIONS LTD
Publication Type:: Journal Article
Citation:: Australian Journal of Management, 2024
Issue Date:: 2024-01-01

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Field	Value	Language
dc.contributor.author	Bachmann, RL
dc.contributor.author	Rasool, S
dc.contributor.author	Spiropoulos, H https://orcid.org/0000-0002-7748-6577
dc.date.accessioned	2025-03-08T04:37:19Z
dc.date.available	2025-03-08T04:37:19Z
dc.date.issued	2024-01-01
dc.identifier.citation	Australian Journal of Management, 2024
dc.identifier.issn	0312-8962
dc.identifier.issn	1327-2020
dc.identifier.uri	http://hdl.handle.net/10453/185586
dc.description.abstract	Using a sample of ASX 500 firms over the 2005–2019 period, we document substantial variation in the use of performance targets within Chief Executive Officer (CEO) compensation contracts, contrasting firms advised by Big 4 accounting entities with other compensation consulting firms. Firms that engage a Big 4 accounting firm are more likely to implement explicit non-financial performance targets within the short-term incentive plan, effectively minimising opportunities for post hoc justification. They also favour the incorporation of relative performance targets that mitigate pay for luck in the long-term incentive plan. Firms that engage a Big 4 accounting firm demonstrate a similar pay-for-performance relation to firms that do not engage a compensation consultant, while firms engaging non-Big 4 consultants exhibit a lower pay-for-performance relation. Our findings suggest that Big 4 accounting firms provide compensation recommendations that encourage the alignment of interests between managers and shareholders. JEL Classification: J33, M12, M52, L25.
dc.language	English
dc.publisher	SAGE PUBLICATIONS LTD
dc.relation.ispartof	Australian Journal of Management
dc.relation.isbasedon	10.1177/03128962241270838
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	15 Commerce, Management, Tourism and Services
dc.subject.classification	35 Commerce, management, tourism and services
dc.title	CEO performance targets: The impact of Big 4 accounting firms versus other compensation consultants
dc.type	Journal Article
utslib.for	15 Commerce, Management, Tourism and Services
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	open_access	*
dc.rights.license	This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0). To view a copy of this license, visit https://creativecommons.org/licenses/by/4.0/
dc.date.updated	2025-03-08T04:37:16Z
pubs.publication-status	Published

Abstract:

Using a sample of ASX 500 firms over the 2005–2019 period, we document substantial variation in the use of performance targets within Chief Executive Officer (CEO) compensation contracts, contrasting firms advised by Big 4 accounting entities with other compensation consulting firms. Firms that engage a Big 4 accounting firm are more likely to implement explicit non-financial performance targets within the short-term incentive plan, effectively minimising opportunities for post hoc justification. They also favour the incorporation of relative performance targets that mitigate pay for luck in the long-term incentive plan. Firms that engage a Big 4 accounting firm demonstrate a similar pay-for-performance relation to firms that do not engage a compensation consultant, while firms engaging non-Big 4 consultants exhibit a lower pay-for-performance relation. Our findings suggest that Big 4 accounting firms provide compensation recommendations that encourage the alignment of interests between managers and shareholders. JEL Classification: J33, M12, M52, L25.

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http://hdl.handle.net/10453/185586