Explaining Executive Pay

1. Front Matter

   Pages I-XXIII

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2. Introduction

   Pages 1-8

3. The compensation setting process

   Pages 9-12

4. Research review on executive pay

   Pages 13-47

5. Research review on director pay

   Pages 48-52

6. Are executives paid for the complexity of the job they have?

   Pages 53-65

7. Can powerful managers extract rents?

   Pages 66-101

8. Research methods

   Pages 102-118

9. Research results

   Pages 119-158

10. Discussion

    Pages 159-168

11. Conclusions

    Pages 169-178

12. Back Matter

    Pages 179-204

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The idea of studying executive pay was born in a lecture on option valuation in spring 2002 at the Norwegian School of Economics and Business Administration NHH. At that time, I started wondering how companies that had granted large amounts of stock options to their executives would react to the sharp decreases in share prices that could be observed since 2000. Based on this interest, I wrote my NHH master thesis about "Employee stock options and falling share prices" investigating a sample of Norwegian IT companies. These companies were especially likely to both have granted substantial amounts of options and suffered from severe declines in share prices. The topic of executive pay continued to attract my interest, mainly because I felt that it offered opportunities to make a real contribution to academic researchers and policy makers alike. In summer 2002, I wrote my master thesis at the University of St. Gallen HSG. I investigated the determinants of executive stock option plan adoptions of Swiss sto- listed companies. Major results were that both large outside shareholders and CEO duality influenced whether companies would adopt stock option plans. At that time, very little information about executive pay was disclosed in Switzerland. However, the Swiss Stock Exchange SWX issued new listing guidelines that required companies to disclose detailed information on Corporate Governance starting from the annual report 2002 to be published in 2003.

• Corporate governance
• Executive Pay
• Executive compensation
• Human Resources
• Management
• Top management

Dr. Lukas Hengartner promovierte bei Prof. Dr. Winfried Ruigrok an der Universität St. Gallen. Er ist Assistent der Geschäftsleitung bei der ABB Schweiz AG.

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