Search Results (7)

This study explores the magnitude of shareholders’ say-on-pay (SOP) votes and its impact on CEO compensation. This study draws its sample from US Russell 3000 companies, the largest US companies, from 2011 to 2019. By creating a dummy variable, we further divided our sample into Russell 3000 and S&P 500 for peer comparison. This study employs descriptive statistics, correlation analysis, and pooled OLS regression and finds that CEO compensation has a significant negative association with pay gap opposition. The coefficient and t-statistic were greater for the S&P 500 than for the Russell group. The study also finds that the CEO-to-employee pay ratio (CTE) is positively correlated with the number of shareholders’ dissenting votes. The coefficient and t-statistic were greater for the Russell group than for the S&P 500 group. Each additional point of CTE increases shareholder dissent votes by 1.4% for the Russell 3000 companies. This study has important implications for corporate directors, investors, and policymakers. The study contributes to the corporate governance literature, particularly on executive compensation. Our findings support the perspective of social comparison theory and contend that shareholders view CEO compensation as a biased evaluation of their contribution to the firm. We have developed a unique measure of the CEO-to-employee pay ratio, which is based on SEC methodology. Our findings provide empirical evidence for investors and policymakers in the U.S. and other jurisdictions. Full article

We explore how insider trading returns, disparities in executive pay, and CEO turnover are interrelated. Our findings reveal both independent and interactive effects for insider trading returns, the CEO pay gap, and the likelihood of CEO turnover. First, an increase in abnormal returns from insider purchases lowers the probability of a CEO’s turnover, while an increase in abnormal returns from insider sales increases the likelihood of a CEO’s dismissal. Second, the CEO pay gap negatively affects the probability of CEO turnover for insider purchases, but it does not have a similar effect on insider sales. Third, the interaction between insider abnormal returns and any CEO pay disparity influences the impact of these returns on CEO turnover. Specifically, this interaction diminishes the positive effect of insider selling on the probability of a CEO’s dismissal, offsets the negative effect of insider purchasing on CEO dismissal, and, finally, amplifies the negative impact of CEO pay disparity on the probability of a CEO’s dismissal during periods witnessing insider purchases. Full article

We investigate how executive pay disparity affects insider profits around earnings news. Our findings reveal that high pay disparity is linked to higher abnormal returns from insider purchases before positive news, suggesting insiders exploit good news for greater gains. Conversely, it is associated with lower abnormal returns from insider sales before negative news, indicating less benefit from such sales. These insights highlight the influence of pay disparity on insider trading and underscore the importance of understanding this dynamic to improve decision-making and reduce misuse of insider information. Full article

The growing presence of women at the top of companies has sparked interest in examining their role in the remuneration gap between senior managers and employees. This article analyses the traditional Chief Executive Officer (CEO)-to-employee pay ratio but includes a new relation, the senior-management-to-employee pay ratio, and extends the research by including six positions for women in company management: on the board of directors, executive directors, CEOs, proprietary directors, independent directors, and senior managers. The study is based on a sample of 77 listed companies in Spain from 2015 to 2022 and the panel data models have been estimated using the Generalised Method of Moments (GMM). The main findings indicate that the proportion of women in different categories of board and senior management positions has a positive effect on the CEO-to-employee pay ratio, especially in companies with higher market capitalisation. In contrast, the proportion of women in senior management positions has a negative effect on the CEO-to-employee pay ratio in all the samples analysed. Government agencies should prioritise the participation of women in non-board senior management positions in order to at least reduce the pay gap between senior managers and employees. Full article

Prior studies have suggested that a large pay gap within the top management team (TMT) can motivate executives to outperform each other and that such competition consequently enhances productivity. We argue that a high pay disparity elicits managerial negative efforts and promotes bribery activities, but this effect can be mitigated by demographic diversity in the TMT and also can be affected by the characteristics of the CEO–TMT demographic interface. Using a sample of listed Chinese firms, our empirical results show that pay disparity is positively associated with bribery expenditure and this association derives mainly from the vertical component when pay disparity is examined via its vertical and horizontal components. In addition, we found that the positive relationship between pay disparity and bribery is weakened when the non-CEO executives have diverse demographic characteristics, and it is strengthened if the CEO is demographically similar to the other executives. This study contributes to the literature on corruption and TMTs by revealing the implications of managerial incentives for firm bribery and by elucidating the role of TMT composition. Full article

This study examines the effect of the CEO–employee pay gap on productivity and performance. Using extensive data of 751 constituents of the Standard and Poor’s (S&P) 1500 index between the years 1992–2016, we found a cubic relationship between salary differential and corporate productivity, with a rising gap adversely affecting productivity principally when it is both too low, as well as too high; intermediate pay inequality levels are less influential. A contrast in the productivity effects of the CEO–worker pay gap for firms with high average salaries and more employees was noticeable, whereas positive productivity gains were present even with a high salary gap. Thus, big companies with a highly skilled workforce are able to achieve tangible benefits through higher salary differentiation. On the other hand, companies with lower average salaries and lower capital intensity were characterized by the negative effects of wage dispersion on productivity. As a result, increasing inequality aversion is an important issue affecting performance among smaller, lower skilled labor dependent firms. Additionally, female CEOs had a significant and positive lagged effect on productivity. Finally, firm market valuation was positively stimulated by the increasing pay gap. Full article

There is a general agreement that extensive remuneration gaps may cause pressing environmental, social, and economic problems. Thus, a critical question to be answered is what is the effect of being at the forefront of corporate sustainability on the CEO–employee pay gap. This paper addresses the question by examining empirical evidence from 415 constituents of the S&P 1500 index over the years 2006–2016. For the above period, we found a positive relationship between a strong commitment to sustainable development at the firm level and the CEO–employee pay differential. Additionally, firms characterized by higher performance, growth potential, and financial robustness constituted more dispersed salary distribution environments. The findings also suggest that CEO gender has a significant effect on the pay gap with a moderating influence of female CEOs. The paper contributes to the literature by shedding additional light on the urgent need for the implementation of a limit capping the CEO–worker pay ratio at a certain, responsible level as one of screening criteria used by sustainability ranking providers. Furthermore, it also shows that leading corporations in the area of sustainability do not implement any serious solutions in the above area on their own accord. Full article