The Managerial Labour Market and the Governance Role of Shareholder Control Structures in the UK

36 Pages Posted: 12 Mar 2002

See all articles by Grzegorz Trojanowski

Grzegorz Trojanowski

University of Exeter Business School

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: May, 2002

Abstract

This paper simultaneously analyses two mechanisms of managerial labour market in the UK - CEO disciplinary turnover and executive compensation schemes. It relates them to the characteristics of corporate ownership structure. Executive cash compensation and turnover proves strongly performance-sensitive. However, the impact of the CEO replacement on subsequent firm performance appears to be weak. Both market - and accounting-based performance indicators play an important role in evaluating executive's productivity. The ownership concentration per se and substantial changes of block holdings do not prove a major determinant of the CEO turnover and compensation. Still, monitoring by some types of owners strengthens governance role of the managerial labour market, while large equity stakes controlled by CEOs result in entrenchment.

Keywords: corporate governance, CEO compensation, disciplinary managerial turnover, financial performance, ownership structure

JEL Classification: G30, G32, G34, J33

Suggested Citation

Trojanowski, Grzegorz and Renneboog, Luc, The Managerial Labour Market and the Governance Role of Shareholder Control Structures in the UK (May, 2002). EFA 2002 Berlin Meetings Presented Paper. Available at SSRN: https://ssrn.com/abstract=302308 or http://dx.doi.org/10.2139/ssrn.302308

Grzegorz Trojanowski (Contact Author)

University of Exeter Business School

Xfi Centre for Finance and Investment
Rennes Drive
Exeter, Devon EX4 4ST
United Kingdom

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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