UK Executive Compensation Practices: New Economy vs. Old Economy

University of Manchester, MSAF, Working Paper

46 Pages Posted: 10 Sep 2003

See all articles by Susanne Espenlaub

Susanne Espenlaub

University of Manchester - Division of Accounting and Finance

Martin Walker

University of Manchester - Manchester Business School

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School

Multiple version iconThere are 2 versions of this paper

Date Written: June 2003

Abstract

This paper examines the executive compensation practices of listed UK retailing companies. We compare New Economy retailers (e-commerce and dot.coms) to more traditional retailers operating in the "Old Economy". We also discriminate between recently floated retailers and their more seasoned counterparts. Using a sample of remuneration contracts for 552 CEOs, other executives and non-executives in 72 listed UK companies in the New and Old Economy, we investigate the structure and level of executive (and non-executive) compensation defined as the sum of salary, annual bonus, and the values of executive stock options and long-term incentive plans (LTIPs). We investigate the extent to which the contract features are determined by firm characteristics, economic sector and the composition of the remuneration committee. The contract features we examine are the time to maturity of the executive stock options, whether options were granted in-, at- or out of the money, and the leverage of the compensation package (in terms of the director's wealth gains through increases in the value of stock options and LTIPs relative to the director's cash pay). In stark contrast to US findings and to UK corporate governance guidelines, we find evidence that a large proportion of sample firms, particularly in the New Economy, issue executive stock options in-the-money, and that the composition of the remuneration committee has a significant impact on the moneyness of stock options.

Keywords: Managerial Compensation, Remuneration Committee, Executive Stock Options, New Economy

JEL Classification: G30, G35, J33

Suggested Citation

Espenlaub, Susanne K. and Walker, Martin and Stathopoulos, Konstantinos, UK Executive Compensation Practices: New Economy vs. Old Economy (June 2003). University of Manchester, MSAF, Working Paper, Available at SSRN: https://ssrn.com/abstract=422761 or http://dx.doi.org/10.2139/ssrn.422761

Susanne K. Espenlaub

University of Manchester - Division of Accounting and Finance ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom
44 161 275 4026 (Phone)

Martin Walker

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Konstantinos Stathopoulos (Contact Author)

The University of Manchester - Alliance Manchester Business School ( email )

AMBS Building
Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 275 6863 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.research.manchester.ac.uk/portal/K.Stathopoulos.html

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