Executive compensation packages: A tool for resolving the owner-manager conflict.
Item
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Title
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Executive compensation packages: A tool for resolving the owner-manager conflict.
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Identifier
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AAI9207045
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identifier
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9207045
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Creator
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Balsam, Steven.
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Contributor
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Adviser: Steven B. Lilien
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Date
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1991
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Language
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English
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Publisher
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City University of New York.
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Subject
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Business Administration, Accounting | Business Administration, Management
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Abstract
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The modern corporation is characterized by the separation of ownership from control. This separation leads to conflicts of interests between managers and shareholders. These conflicts include the level of effort provided by management and the division of income between management and shareholders. The compensation package has a role in resolving these conflicts. If designed properly it encourages management to provide the optimal level of effort, at a minimum cost to shareholders.;This study examined three broad questions relating to compensation. First it examined whether compensation packages were altered in response to exogenous events that affected the relative costliness of the components of the package. Second it examined the effect of accounting choices on compensation and the association between compensation and reported accounting income. Third it examined whether monitoring has an effect compensation and the association between compensation and reported accounting income.;The data used in this study were obtained from corporate proxy statements, the compensation surveys published in Forbes magazine, and Compustat, a database containing financial variables. To control for the non-normality of the data both parametric and non-parametric tests were used to test the hypotheses in this study. These tests included time-series and cross-sectional regression analysis.;This study found several interesting results. The Tax Reform Act of 1986 appears to have led to changes in the composition of the compensation package in ways consistent with maximization of firm value. Evidence was found indicating that accounting methods are considered in determining CEO compensation. Support was also found for the hypothesis that increased monitoring of management leads to a greater association between compensation and reported income.;This evidence is consistent with directors setting compensation to maximize firm value. This is a particularly timely finding, given that the amounts paid to CEOs are currently being criticized as excessive by some in the political process. A limitation of this study is that its conclusions are based on associations, and as such, no cause and effect can be determined.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
