Thursday, November 20, 2008
[IWS] IILS: EXECUTIVE COMPENSATION: TRENDS & POLICY ISSUES [November 2008]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
International Institute for Labour Studies (IILS) at the ILO
Executive compensation: Trends and policy issues
by Franz Christian Ebert, Raymond Torres and Konstantinos Papadakis.
http://www.ilo.org/public/english/bureau/inst/download/dp19008.pdf
[full-text, 40 pages]
[excerpt]
This paper has been prepared as background to the new Institute's publication entitled
World of Work Report, which this year focuses on the issue of income inequality. The Report
shows that, in the majority of countries, the incomes of richer households have increased relative
to those of their middle- and low-income counterparts.
This can be good for the economy. Indeed, it is crucial to reward work effort, talent and
innovation key engines of economic growth and wealth creation.
However, there are instances where income inequality reaches excessive levels, in that it
erodes social stability. Growing perceptions that income inequalities are too high may weaken
political support for pro-growth policies. Too much income inequality can also be conducive to
unstable economic growth.
The Report examines a number of factors which may be conducive to excessive income
inequality, such as financial globalization and steep increases in executive pay, disconnected
from firm performance. The role of domestic factors is also analyzed, including i) emerging
patterns of employer-employee bargaining; ii) the trend increase in non-standard forms of
employment; and iii) the ability of the tax and transfer systems to redistribute the gains from
economic growth.
This paper reviews research on one of the key Report's topics, namely executive pay, its
linkages with enterprise performance and related policy issues. It is one of the first cross-country
analyses of what has become a controversial topic during the financial crisis.
TABLE OF CONTENTS
Preface.........................................................................................................................................................v
A. Introduction and main findings .............................................................................................................1
B. How does executive pay compare across countries and how has it changed?.......................................2
1. What is executive pay, how is it measured? ......................................................................................2
2. How does executive pay compare across countries...........................................................................5
3. How has executive pay evolved? ......................................................................................................6
4. To what extent has executive pay responded to performance?........................................................11
C. What explains the development in executive compensation? .............................................................13
1. Theoretical framework ....................................................................................................................13
2. Regulatory Framework of Executive Compensation.......................................................................15
a) International regulation................................................................................................................15
b) National regulation ......................................................................................................................15
3. The role of institutional factors in shaping executive compensation...............................................16
a) The role of directors in determining executive compensation .....................................................16
b) The role of institutional investors................................................................................................17
c) The role of consultancy firms ......................................................................................................17
4. The role of share-based compensation ............................................................................................18
Ongoing policy debates ..............................................................................................................................19
Conclusion.................................................................................................................................................19
References .................................................................................................................................................21
Annex: List of companies referred to in the report.....................................................................................26
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
International Institute for Labour Studies (IILS) at the ILO
Executive compensation: Trends and policy issues
by Franz Christian Ebert, Raymond Torres and Konstantinos Papadakis.
http://www.ilo.org/public/english/bureau/inst/download/dp19008.pdf
[full-text, 40 pages]
[excerpt]
This paper has been prepared as background to the new Institute's publication entitled
World of Work Report, which this year focuses on the issue of income inequality. The Report
shows that, in the majority of countries, the incomes of richer households have increased relative
to those of their middle- and low-income counterparts.
This can be good for the economy. Indeed, it is crucial to reward work effort, talent and
innovation key engines of economic growth and wealth creation.
However, there are instances where income inequality reaches excessive levels, in that it
erodes social stability. Growing perceptions that income inequalities are too high may weaken
political support for pro-growth policies. Too much income inequality can also be conducive to
unstable economic growth.
The Report examines a number of factors which may be conducive to excessive income
inequality, such as financial globalization and steep increases in executive pay, disconnected
from firm performance. The role of domestic factors is also analyzed, including i) emerging
patterns of employer-employee bargaining; ii) the trend increase in non-standard forms of
employment; and iii) the ability of the tax and transfer systems to redistribute the gains from
economic growth.
This paper reviews research on one of the key Report's topics, namely executive pay, its
linkages with enterprise performance and related policy issues. It is one of the first cross-country
analyses of what has become a controversial topic during the financial crisis.
TABLE OF CONTENTS
Preface.........................................................................................................................................................v
A. Introduction and main findings .............................................................................................................1
B. How does executive pay compare across countries and how has it changed?.......................................2
1. What is executive pay, how is it measured? ......................................................................................2
2. How does executive pay compare across countries...........................................................................5
3. How has executive pay evolved? ......................................................................................................6
4. To what extent has executive pay responded to performance?........................................................11
C. What explains the development in executive compensation? .............................................................13
1. Theoretical framework ....................................................................................................................13
2. Regulatory Framework of Executive Compensation.......................................................................15
a) International regulation................................................................................................................15
b) National regulation ......................................................................................................................15
3. The role of institutional factors in shaping executive compensation...............................................16
a) The role of directors in determining executive compensation .....................................................16
b) The role of institutional investors................................................................................................17
c) The role of consultancy firms ......................................................................................................17
4. The role of share-based compensation ............................................................................................18
Ongoing policy debates ..............................................................................................................................19
Conclusion.................................................................................................................................................19
References .................................................................................................................................................21
Annex: List of companies referred to in the report.....................................................................................26
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 8:33 AM
