Academic journal article IUP Journal of Corporate Governance

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Academic journal article IUP Journal of Corporate Governance

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Article excerpt

Excessive executive compensation, particularly that of Chief Executive Officer (CEO), is a serious corporate governance problem in the United States and other Anglo- American countries. Many empirical studies have analyzed the problem from various perspectives. But very few have analyzed it conceptually. In the first paper of this issue, "Runaway CEO Pay? Blame the Boards", Franklin Strier analyzes the reasons for the abnormally high CEO salaries in USA, compared to other countries. By analyzing the literature on this topic, he argues that the board of directors are to be blamed for the problem. He also highlights many conflicts of interests in the process of determining the executive compensation by the board. For example, in the case of CEO-Chairman duality, the board that fixes the salary of the CEO is headed by the CEO himself, resulting in obvious conflict of interests. The author also gives suggestions to overcome the conflict of interests with the support of literature. For instance, he suggests giving the shareholders the power to nominate directors.

Though excessive executive compensation is not yet a serious problem in India, it might become a controversial one soon, as the executive perks are increasing at a faster pace compared to that of ordinary workers. In such an environment, it is very important to ascertain the factors that determine the salary of the executives. In the second paper, "Personal Characteristics and Executive Compensation: A Study of Executive Directors in India", the authors Lakhwinder Singh Kang and Payal analyze whether the personal characteristics play any role in determining the compensation. Age, educational qualification, experience, tenure and compensation of 94 directors from 48 companies in India for the years 2003-04 to 2005-06 were examined. The findings of the panel data analysis show that none of the personal attributes is a significant determinant of the executive compensation. It implies that there are some factors other than the personal attributes of the executive directors which are considered while determining their remuneration. …

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