Measuring Compliance with Executive Remuneration Standards at Controlled Corporations

33 Pages Posted: 9 Nov 2016 Last revised: 17 Nov 2016

See all articles by Roberto Barontini

Roberto Barontini

Scuola Superiore Sant'Anna di Pisa - Institute of Management

Stefano Bozzi

Università Cattolica del Sacro Cuore di Milano

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance; European Corporate Governance Institute (ECGI)

Date Written: November 2016

Abstract

In this paper we analyze the relationship between conformity to executive remuneration standards, corporate ownership, and the level and structure of CEO compensation for large European listed companies in the years 2007 and 2010. We show that controlled corporations, either family or State owned, conform to executive remuneration standards less than widely held firms. We also show that weaker compliance is associated with lower CEO pay and more “conservative” incentive structures. We interpret this “conformity gap” from the perspective of individual firms and from a societal perspective, with the aim to contribute to frame the policy questions concerning executive pay at controlled corporations. Different policy implications depend on whether the conformity gap reflects a lower need for managerial incentives, given the monitoring by controlling shareholders, or the latter’s willingness to extract private benefits of control. We argue in this paper that the former hypothesis seems to prevail, so that regulators should abstain from increasing the level of enforcement of executive remuneration standards.

Keywords: Agency theory; Executive remuneration; Controlling shareholders; Compliance; Corporate governance Codes; Private benefits of control

JEL Classification: G30, G32, G34, G38, K22, K31, M12

Suggested Citation

Barontini, Roberto and Bozzi, Stefano and Ferrarini, Guido, Measuring Compliance with Executive Remuneration Standards at Controlled Corporations (November 2016). European Corporate Governance Institute (ECGI) - Law Working Paper No. 331/2016. Available at SSRN: https://ssrn.com/abstract=2848224 or http://dx.doi.org/10.2139/ssrn.2848224

Roberto Barontini

Scuola Superiore Sant'Anna di Pisa - Institute of Management ( email )

Piazza Martiri della Libertà, 24
Pisa, Pisa 56124
Italy
++39 050 883.111 (Phone)

Stefano Bozzi (Contact Author)

Università Cattolica del Sacro Cuore di Milano ( email )

20123 Milano
Italy
+39 02 7234.2436 (Phone)
+39 02 7234.2406 (Fax)

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance ( email )

Via Balbi, 22
16126 Genova, 16100
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

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