Do boards effectively link firm objectives to CEO bonus performance measures?

IF 3.3 Q2 MANAGEMENT

Journal of Management & Governance Pub Date : 2023-10-03 DOI:10.1007/s10997-023-09690-9

Orla Lenihan, Niamh M. Brennan

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Abstract

Abstract This study examines whether S&P 500 boards govern their firms effectively by linking short-term operational objectives to appropriate CEO bonus performance measures. Our cross-sectional regression analysis reveals that firms with higher growth opportunities place more reliance on sales and growth performance measures in CEO bonus plans. We also find that cash-strapped firms emphasize the use of cash-based CEO performance measures. However, boards of high-cost firms do not tie a greater portion of CEO bonus to measures informative of cost-cutting efforts. This observation is contrary to effective-governance expectations and implies that boards should regularly scrutinize CEO bonus measures to ensure alignment with value-creating firm objectives. Additionally, we report an increase over time in the mean weight of social-and-environmental measures in CEO bonus plans. Boards evaluate CEO performance on sustainability issues by including quantifiable short-term performance targets in CEO bonus plans. However, there is currently a dearth of evidence on the optimality of sustainability linked executive pay in the academic literature. Our evidence on the rising weight of social-and-environmental measures in CEO bonus plans should motivate further research on this topic.

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董事会是否有效地将公司目标与CEO奖金绩效指标联系起来?

摘要本研究考察了标准普尔500公司董事会是否通过将短期经营目标与适当的CEO奖金绩效指标联系起来有效地治理公司。我们的横断面回归分析表明，具有较高增长机会的公司在CEO奖金计划中更依赖于销售和增长绩效指标。我们还发现，现金短缺的公司强调使用基于现金的CEO绩效指标。然而，高成本公司的董事会并没有将CEO奖金的大部分与削减成本的措施联系起来。这一观察结果与有效治理的预期相反，并意味着董事会应定期审查首席执行官的奖金措施，以确保与创造价值的公司目标保持一致。此外，我们报告称，随着时间的推移，社会和环境措施在CEO奖金计划中的平均权重有所增加。董事会通过在CEO奖金计划中纳入可量化的短期绩效目标来评估CEO在可持续发展问题上的表现。然而，目前在学术文献中缺乏与可持续性相关的高管薪酬的最优性的证据。我们的证据表明，社会和环境措施在CEO奖金计划中的权重不断上升，这应该会激发对这一主题的进一步研究。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Management & Governance MANAGEMENT-

CiteScore

6.40

自引率

3.70%

发文量

期刊介绍： The Journal of Management and Governance (JMG) is an international journal dedicated to advancing the understanding of corporate governance issues within and throughout privately-held firms, publicly-held corporations and government-controlled organizations. The journal is devoted to exploring the links between management and governance through both theoretical analyses and empirical investigations to improve the understanding of all the rules, codes, principles, practices, processes, mechanisms, structure and relationships, as well as institutions, networks and individuals affecting the way firms and organizations are managed, administered and controlled. Since corporate governance is a multi-faceted subject, the journal aims to analyze a broad spectrum of topics and issues related to the management and governance of firms and organizations: strategies and decision-making; accounting, reporting and information control; measurement issues in governance; relational, cognitive and behavioural based; institutional economics. JMG intends to act as an arena of scientific debate within and among academic and professional networks of researchers with a strong interest in investigating how knowledge, preferences and performance are formed and how they influence governance and management practices and policies. Contributions from all areas of business administration (accounting and control, general and strategic management, organizational theory and behaviour, finance and banking) and manuscripts concerning both the private and the public sectors are welcome to the extent that they contribute to these general issues and to the understanding of governance thus broadly defined. JMG is international in authorship and editorship. It follows the internationally shared norms of blind review and research quality standards, but it distinctively and deliberately adheres to a constructive rather than destructive review process approach. The j ournal has various paper formats and methods. Any research strategy is recognised, as long as it effectively addresses the issue at hand and rigorously adheres to the methodology adopted, in survey research or simulation, a case study or a statistical analysis. Officially cited as: J Manag Gov