Abstract

http://ssrn.com/abstract=715862
 
 

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Executive Remuneration in the EU: The Context for Reform


Guido A. Ferrarini


University of Genoa - Law School; European Corporate Governance Institute (ECGI)

Niamh Moloney


London School of Economics - Law Department; European Corporate Governance Institute (ECGI)

April 2005

ECGI - Law Working Paper No. 32/2005

Abstract:     
This paper shows how clear divergences arise across the EU in how executive remuneration is structured. Sharp differences also occur in the adoption of best practices in pay-setting and in the disclosure of executive pay. These divergences are broadly in line, as agency theory predicts, with block-holding and dispersed ownership governance profiles. While the EU has recently adopted two important 2004 Recommendations on executive pay, the paper argues that EU-led reforms should be undertaken with care. Harmonization should be limited and only address disclosure. Disclosure is central to the adoption of effective incentive contracts in that it can manage the particular agency costs of executive pay, across dispersed and blockholding systems, without intervening in governance choices and structures. Any other interventions in the pay process carry the risk of distorting competition and interfering with the dynamics of different ownership structures and economic contexts.

Number of Pages in PDF File: 37

Keywords: executive remuneration, disclosure, ownership structure, corporate governance

JEL Classification: G3, J33, K22

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Date posted: May 4, 2005  

Suggested Citation

Ferrarini, Guido A. and Moloney, Niamh, Executive Remuneration in the EU: The Context for Reform (April 2005). ECGI - Law Working Paper No. 32/2005. Available at SSRN: http://ssrn.com/abstract=715862 or http://dx.doi.org/10.2139/ssrn.715862

Contact Information

Guido A. Ferrarini (Contact Author)
University of Genoa - Law School ( email )
Via Balbi, 22
16126 Genova
Italy
+39 010 209 9894 (Phone)
+39 010 209 9890 (Fax)
HOME PAGE: http://www.clfge.org
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Niamh Moloney
London School of Economics - Law Department ( email )
Houghton Street
London WC2A 2AE, WC2A 2AE
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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