Executive Compensation in UK Property Companies

Abstract

We study the drivers of executive compensation in the listed UK property sector. The United Kingdom provides an excellent opportunity to analyze executive compensation due to high transparency in the different components of executive compensation. We show that company size is the most important variable in explaining the level of executive compensation. We find that absolute and relative share performance significantly explains long-term compensation, that management style has a distinct influence on the level of executive compensation, and that using alternative monitoring mechanisms (institutional shareholders, debtholders, and outside directors) leads to higher levels of long-term incentives. We find only weak evidence of pay-performance sensitivity for both cash and long-term compensation. Executive shareholdings provide a much stronger link between pay and performance than does executive compensation.

Keywords: Real Estate, Agency issues, Executive compensation

JEL Classification: G34, G35, J33