Fairness of CEO Compensation (eBook)

Preface 7
Acknowledgements 9
Contents 10
About the Author 12
Abbreviations 13
Chapter 1: Introduction 15
1.1 Background 15
1.2 Objectives 19
1.3 Approach 20
1.4 Limitations 20
1.5 Definition of the Terms 21
1.6 The Fair CEO Compensation Framework 24
References 28
Chapter 2: The Concept of Fair CEO Compensation 30
2.1 What Is Fairness and Fair Pay? 30
2.2 Theoretical Foundations for Executive Compensation and Fair Pay 32
2.2.1 Governance Theories 33
2.2.1.1 Managerialism or Managerial Power Theory 33
2.2.1.2 Agency Theory 33
2.2.1.3 Stewardship Theory 35
2.2.1.4 Behavioural Agency Theory (BAT) 35
2.2.1.5 Stakeholder Theory 36
2.2.2 Sociological and Ethical Theories 38
2.2.2.1 Equity Theory 38
2.2.2.2 Social Norm Theory 38
2.2.2.3 Social Comparison Theory 39
2.2.2.4 Pay Dispersion Theory 39
2.2.2.5 Upper Echelon Theory 39
2.2.2.6 Entitlement Theory and Tournament Theory 39
2.2.2.7 Business Ethics Theory 40
2.2.2.8 Virtue Ethics Theory 40
2.2.3 Schools of Thought 40
2.2.3.1 The Iron Law School 40
2.2.3.2 The School of Supply and Demand 41
2.2.3.3 The Hay Entitlement School 41
2.2.3.4 The Pay-for-Performance School 41
2.3 How Is Compensation Fairness Applied? 41
References 48
Chapter 3: Compensation for Financial Performance 51
3.1 CEO Compensation in Listed Firms 58
3.2 Trend in the Highest Compensation in Listed Companies 61
References 76
Chapter 4: Compensation for Non-financial Performance (ESG Scores) 78
References 85
Chapter 5: Compensation According to Risk of the Firm 86
References 90
Chapter 6: Compensation Not More than Peers 92
References 97
Chapter 7: Compensation According to Characteristics, Competence, and Individual Performance 100
References 106
Chapter 8: Compensation According to Strategy 109
References 113
Chapter 9: Compensation According to Culture 115
References 121
Chapter 10: Compensation According to Integration 123
References 134
Chapter 11: Practical Insights 136
11.1 Insights from Martin Hilb 136
11.2 Insights from Hermann J. Stern 138
11.3 Insights from Simon Patterson 141
11.4 Insights from Matthias Mölleney 144
11.5 Insights from Anna Sender and Alexandra Arnold 146
11.6 Insights from Alexander F. Wagner 149
11.7 Insights from Remo Schmid 152
11.8 Insights from Olof Svensson 156
References 159
Chapter 12: Conclusion, Implication, and Future Research 161
12.1 Summary and Conclusion 161
12.2 Theoretical Implications and Future Research 162
12.3 Practical Implications 164
Appendix 165
Appendix A Survey on Employees´ Perception of Fair CEO Compensation 165
Appendix B: Checklist for Fair CEO Compensation 172
Appendix C Supporting Tables 179