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

ASJC Scopus subject areas

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

Fingerprint Dive into the research topics of 'Executive pay, tournaments and corporate performance in UK firms'. Together they form a unique fingerprint.

  • Cite this