Onwards and Upwards: Why Companies Change Their Executive Remuneration Schemes, and Why this Leads to Increases in Pay

15 Pages Posted: 1 Oct 2007  

Ruth Bender

Cranfield School of Management

Abstract

This paper reports interview-based research examining reasons for the continued increase in executive directors' remuneration in large UK companies. This issue has not specifically been addressed by previous studies, which have focused on the level of the increases, rather than their underlying explanations. Reasons given for making changes included: increases due to being below-market; changing performance-related schemes that did not pay out or paid less than expected; changes in the company's culture or strategy; changes to senior personnel; and compliance with good practice in human resource management and in corporate governance. The results are analysed through two theoretical lenses. Agency theory provides an explanation of the structure of the contracts; expectancy theory suggests why schemes might be changed to motivate the executives.

Suggested Citation

Bender, Ruth, Onwards and Upwards: Why Companies Change Their Executive Remuneration Schemes, and Why this Leads to Increases in Pay. Corporate Governance: An International Review, Vol. 15, No. 5, pp. 709-723, September 2007. Available at SSRN: https://ssrn.com/abstract=1017394 or http://dx.doi.org/10.1111/j.1467-8683.2007.00609.x

Ruth Bender (Contact Author)

Cranfield School of Management ( email )

Cranfield MK43 OA1
United Kingdom
+44 (0)1234751122 (Phone)
+44 (0)1234751806 (Fax)

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