Pay Comparability Across and within UK Boards: An Empirical Analysis of the Cash Pay Awards to CEOS and Other Board Members

26 Pages Posted: 18 Nov 2002

See all articles by Mahmoud Ezzamel

Mahmoud Ezzamel

Cardiff Business School - Accounting and Finance Section

Robert Watson

Instituto de Empresa

Abstract

Drawing on the literature on social comparison and equity theories, this paper analyses the determinants of, and the relationships between, the cash pay awards of CEOs and other board members for a sample of large UK companies over the period 1992-95. Our results suggest that external labour market and internal (i.e., within board) pay comparisons are important in explaining both CEO and other directors' pay awards. In the case of CEOs, however, there is evidence of an asymmetric adjustment to prior period pay anomalies, whereby the pay of the relatively underpaid executives displays significantly greater sensitivity to external market comparison pay levels. This asymmetric adjustment process results in a 'bidding-up' of average CEO pay relative to other board members over the four year period investigated.

Suggested Citation

Ezzamel, Mahmoud and Watson, Robert, Pay Comparability Across and within UK Boards: An Empirical Analysis of the Cash Pay Awards to CEOS and Other Board Members. Available at SSRN: https://ssrn.com/abstract=309226

Mahmoud Ezzamel (Contact Author)

Cardiff Business School - Accounting and Finance Section ( email )

Colum Drive
Cardiff CF10 3EU
United Kingdom
+44 (0) 29 2087 4277 (Phone)
+44 (0) 29 2087 4419 (Fax)

Robert Watson

Instituto de Empresa ( email )

Serrano 99
Madrid, 28006
Spain

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