Eric Engesaeth
| Date of PhD defense: | 21 June 2011 |
| Title of thesis: | Managerial Compensation Contracting |
| ISBN: | 978 90 5668 286 6 |
| Promotor: | Prof.dr. Piet Duffhues Prof.dr. Luc Renneboog |
Abstract:
The purpose of this dissertation is to research managerial compensation contracts, by combining academic insights with practical experience. It consists of three studies.
Developing the remuneration policy for the executive board, in large corporations, is effectively performed by the remuneration committee. What exactly is its role and how are decisions reached? There is a vast body of literature that looks from the outside in, which transforms the executive remuneration decision process into a black box. Because there is no theoretical model that really applies, some scholars argue that this has fragmented the debate. Chapter 2 comments on some of the existing theoretical anchor points from a practical perspective, focusing on the role of the remuneration committee and its decisions.
Remuneration committees have the task to adequately balance risk and reward in managerial compensation contracts to support company goals. Because ‘too much of a good incentive’ can result in counterproductive behaviour, measuring incentive strength can enhance the quality of the executive remuneration decision. In chapter 3, a single quantifiable yardstick is created to measure compensation risk. Besides developing the CompRisk index and presenting the observed landscape of CEO compensation risk in the Netherlands and the UK, the use of the measure is explored and its determinants are researched.
The success of a business is a positive function of the amount of talent in the organisation. Human capital becomes additionally important when one moves up the corporate ladder. This is because decisions geometrically affect the organisation; positively or negatively. The CEO has final decisive power. However, an important part of this power is cascaded to managers, so called profit centre heads (PCH), that report directly or indirectly to him. These individuals have profit & loss responsibility for a part of the business and / or are jointly responsible for the total company, but often remain invisible for the outside world. Therefore, in chapter 4, empirical research is executed on the determinants of PCH compensation, as well as the remuneration gap between the PCH and the CEO.
Global / English