Executive pay, tournaments and corporate performance in UK firms

Martin J. Conyon, Graham V. Sadler

Research output: Contribution to journalArticle

28 Citations (Scopus)

Abstract

This paper explores the relationship between executive pay and corporate performance. First, we focus on the pay-for-performance sensitivity (PPS), review recent evidence (mainly UK) and outline a methodology for calculating the PPS itself. Secondly, we review the evidence on tournament theory. Tournament models predict that career concerns generate incentives for executives and can explain observed variations in pay outcomes in the boardroom. Thirdly, we provide evidence on the distribution of the PPS for 532 executives within 100 large UK stock market companies for 1997. Unlike prior work, we include non-CEO executives in the analysis. We showthat the PPS increases through organizational levels. Also the statistic is not constant across firms. Finally, we consider the relationship between corporate performance and incentives. We show, consistent with prior evidence, that there is a positive relationship between firm performance and the effective ownership of stock-based compensation by management.

Original languageEnglish
Pages (from-to)141-168
Number of pages28
JournalInternational Journal of Management Reviews
Volume3
Issue number2
DOIs
Publication statusPublished - 21 May 2003
Externally publishedYes

Fingerprint

Statistics
Industry
Corporate performance
Tournament
Pay-for-performance
Executive pay
Incentives
Compensation and Redress
Financial markets
Career concerns
Ownership
Methodology
Organizational level
Tournament theory
Firm performance
Stock-based compensation
Stock market

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Strategy and Management
  • Management of Technology and Innovation

Cite this

Executive pay, tournaments and corporate performance in UK firms. / Conyon, Martin J.; Sadler, Graham V.

In: International Journal of Management Reviews, Vol. 3, No. 2, 21.05.2003, p. 141-168.

Research output: Contribution to journalArticle

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