Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/43714
Title: Pensions as a Form of Executive Compensation
Authors: Goh, L
Li, Y
Keywords: Corporate governance
Executive compensation
Managerial power
Pensions
Performance-based compensation
Issue Date: 2015
Publisher: Wiley-Blackwell
Source: Journal of business finance and accounting, 2015, v. 42, no. 9-10, p. 1154-1187 How to cite?
Journal: Journal of business finance and accounting 
Abstract: This paper investigates the role of pensions as an element of total executive compensation, and the relationship between pensions and performance-based compensation in executive pay. Using hand-collected data on FTSE 100 CEOs and senior executives from 2004-2011, we document that pensions function as a substitute for performance-based compensation (primarily bonuses) in both cross-sectional and time-series settings. We also examine the effect of corporate governance characteristics on executive pensions. We find that corporate governance characteristics associated with stronger board monitoring play a constraining role on the magnitude of pensions. Our evidence of substitution effects between pensions and performance-based compensation is consistent with a managerial power view of executive compensation-setting, and the use of pensions as a 'stealth' element of compensation. Our findings are robust to considering different types of pensions, product market competition, and cross-listing. Sub-period analysis shows that pensions decrease and substitution effects weaken following the 2008 financial crisis. Moreover, we find no evidence that the use of compensation consultants with potential conflicts of interest is associated with higher pensions. Overall, our study contributes to a greater understanding of the role of pensions in executive compensation, and shows the importance of including pensions in analysis of executive compensation.
URI: http://hdl.handle.net/10397/43714
ISSN: 0306-686X
DOI: 10.1111/jbfa.12162
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