CEO Pay in FTSE 100: Pay Inequality, Board Size and Performance

59 Pages Posted: 6 Sep 2012

See all articles by William Forbes

William Forbes

School of Management, Queen Mary University of London

Date Written: September 1, 2012

Abstract

n this paper we examine the agency costs of seemingly excessive pay awards to CEO's within the FTSE 100 in the last decade. Are CEOs taking a large proportion of the total pot (a big "pay slice") more, or less, able to return value to shareholders by better management? In presenting this evidence we describe variations in whole distribution of executive pay, rather than invoking some arbitrary cut-off point (e.g. the CEO's pay as a percentage of their five highest paid peers or the CPS), to determine how changes in shareholder value match to concurrent changes in the distribution of executive pay. We ask is the impact of executive pay-inequality a function of board size, rendering the CPS measure problematic in this context? If so how does the interaction of board size and corporate performance size, as measured by shareholder returns, explain variation in the sensitivity of the pay-performance relationship for UK FTSE executives? We advance the Gini coefficient as a preferable measure of executive pay inequality in order to capture the impact of perceived inequality upon corporate performance.

Keywords: managerial remuneration, inequality, corporate performance

JEL Classification: M52

Suggested Citation

Forbes, William, CEO Pay in FTSE 100: Pay Inequality, Board Size and Performance (September 1, 2012). Available at SSRN: https://ssrn.com/abstract=2140204 or http://dx.doi.org/10.2139/ssrn.2140204

William Forbes (Contact Author)

School of Management, Queen Mary University of London ( email )

Bancroft Building, QMUL
Mile End Road,
London, London E1 4NS
United Arab Emirates

HOME PAGE: http://www.williamforbes.0catch.com

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