Martin J. Conyon

• University of Pennsylvania

Manuscript Type Empirical Research Question/Issue This study examines reactions of financial analysts to the disclosure of corporate fraud. We posit that analysts downgrade earnings forecasts of fraud firms after fraud disclosure to signal their quality and integrity. We explore how internal and external contingencies shape analysts’ reputational...

The authors assert that broad-based stock options create a social exchange relationship between the employer and employees, leading to higher individual job performance in the next period. They compare this social exchange hypothesis to the more typical incentive-based explanation for stock options, which is that holding options generates financial...

Do compensation consultants drive up CEO pay for the benefit of managers, or do they design pay packages to benefit firm owners? Using a large sample of UK firms from the FTSE All‐Share Index over the 2003–2011 period, we show a positive correlation between the presence of compensation consultants and CEO pay. Importantly, isolating this effect is...

This study investigates how CEO behavior and incentives change during the CEO's final years in office, known as the horizon problem. We examine how the horizon problem alters managerial slack, a measure of operational inefficiency and managerial value diversion. Using data on Chinese publicly traded firms between 2003 and 2011, we find that manager...

Purpose This is a short commentary on Herman Aguinis, Geoffrey Martin, Luis Gomez-Mejia, Ernest Boyle and Harry Joo (2017): “Two sides of CEO pay injustice: A power law conceptualization of CEO over and underpayment.” Design/methodology/approach Using insights from prior studies on executive compensation, the author’s commentary presents a criti...

This paper investigates the relationship between a CEO's foreign experience and CEO compensation. Our analysis is based on the constituent firms of the UK FTSE 350 index from 1999 to 2015. We find that foreign CEOs and national CEOs with foreign working experience receive significantly higher levels of total compensation compared to similar UK CEOs...

We investigate the relation between firm performance and boardroom gender diversity using quantile regression methods. Using annual data on over 3000 US firms from 2007 to 2014, we show that the presence of women on the board has a positive effect on firm performance, and this effect varies at different parts of the performance distribution. Critic...

Performance appraisals, the evaluation of an employee"s job performance over the previous period by one"s supervisor, are a standard practice in virtually every organization of any size. They are arguably the single most important and time-consuming task of managers. Despite this, remarkably little is known about how they operate, especially about...

This paper investigates the relation between foreign experience and CEO compensation. Using a sample of large UK firms from the FTSE 350 index from 2003 to 2011, we find that foreign-born CEOs and national CEOs with foreign working experience receive significantly higher levels of total compensation compared to those without these characteristics....

We investigate the relation between firm performance and boardroom gender diversity using quantile regression methods. We explicitly test for heterogeneity in the performance impact of women on boards. Using data on over 2000 US firms in 2013 we show that board gender diversity has a positive effect on the conditional mean of firm performance measu...

This paper studies China's ‘star-CEOs’ defined as members of the National People's Congress (NPC) or the National Committee of the Chinese People's Political Consultative Conference (CPPCC) and ‘politically connected’ CEOs who have previous government or military experience. We evaluate the effect of ‘star-CEOs’ and ‘political connected’ CEOs on fi...

We investigate whether Chinese CEOs consume abnormal or ‘excess’ perks prior to leaving their firms. Agency models predict that CEO incentives and behavior might change in the years leading up to CEO turnover (the ‘horizon effect’). We predict that CEOs might consume excess perks at the expense of owners’ interests. Using data on Chinese publicly t...

The paper investigates costs and benefits of hiring a star CEO. Using a sample of Chinese listed firms between 2000 and 2010, we find that the appointment of a star CEO is associated with significantly positive cumulative abnormal returns surrounding the announcement day. These findings remain after controlling for other confounding factors that in...

We provide evidence on the use of accounting versus stock market performance measures as determinants of Chinese top managers’ compensation over 2001–2007. We theorize and find that (1) accounting returns are weighted more heavily in general than stock returns in determining top executive compensation, (2) state-owned enterprises (SOEs) rely signif...

US executive compensation has increased significantly since the early 1990s. This growth has been associated with the use of more equity pay (such as stock options and restricted stock) and less reliance on fixed salaries. Critics assert that the growth in CEO pay reflects a fundamental governance failure. Weak or compliant boards have failed to re...

We study asymmetric performance benchmarking in Chinese executive compensation contracts between 2000 and 2010. We predict that while relative performance evaluation criteria are important in executive pay contracts, managerial power and influence will result in a decoupling between pay and performance. We predict that Chinese managers are rewarded...

This study investigates the relation between CEO compensation and corporate fraud in China. We document a significantly negative correlation between CEO compensation and corporate fraud using data on publicly traded firms between 2005 and 2010. Our findings are consistent with the hypothesis that the firm’s owners and the board of directors penaliz...

In recent years, scholars have begun to devote significant attention to the systematic examination of Chinese corporate governance given China’s tremendous economic growth and development of capital markets (Allen et al., 2005; Conyon and He, 2011; Hu et al., 2010; Peng et al., 2003, 2010). Executive pay is a significant corporate governance issue....

The financial crisis that began in 2008 and its lingering aftermath have caused many intellectuals and politicians to question the virtues of capitalist systems. This book analyzes both the strengths and weaknesses of capitalist systems. The volume opens with articles on the historical and legal origins of capitalism. These are followed by articles...

Manuscript Type Empirical Research Questions This study investigates the determination of Chinese CEO pay. We focus on three related questions: (1) Is Chinese CEO pay related to firm performance? (2) Are CEO pay dynamics important? (3) Does corporate governance affect CEO pay and equity incentives in C hina? Research Findings Using data on CEO co...

We investigate the relationship between chief executive officer (CEO) turnover and firm performance in China's publicly traded firms. We provide evidence on the use of accounting and market-based performance measures in CEO turnover decision. We also investigate the moderating roles of noise in performance measures, firm growth opportunities, state...

We investigate executive compensation and corporate governance in China’s publicly traded firms. We also compare executive pay in China to the USA. Consistent with agency theory, we find that executive compensation is positively correlated to firm performance. The study shows that executive pay and CEO incentives are lower in State controlled firms...

IntroductionCompensation ConsultantsLiterature ReviewConsultants and Ceo Pay: Uk EvidenceSummary and Conclusions Discussion QuestionsAbout the Author

August 1999The impact of mergers and acquisitions on profitability and employee remuneration in UK manufacturing industry

The financial crisis of the late 2000s resulted in enormous costs to the economies of many countries and the fortunes of millions of families, and it challenged a host of our conceptions and theories of corporate governance. The governing boards of many financial-services firms seemed unable to prevent the risky and ill-fated decisions that jeopard...

No abstract available.

This Article surveys recent empirical studies on the relation between compensation consultants and CEO pay. The economic rationale for using executive compensation consultants is that they supply valuable data, information, and professional expertise to client firms. However, critics argue that the consultant's independence might be compromised bec...

We develop a multi-theoretic approach, drawing on economic, institutional, managerial power and social comparison literatures to explain the role of the external compensation consultant in the top management pay setting institutional field. Taking advantage of recent disclosure requirements in the UK, we collect data on compensation consultant use...

We investigate gift exchange relationships in real jobs, making use of a field quasi-experiment associated with the exercise of stock options for roughly 4500 managers in a large public company. In this company, option grants are set equally for all employees within occupational categories, and financial markets set the price at which the options a...

The recent financial crisis has created a public uproar over top-executive pay packages and has led to calls for reform of executive pay in Europe and the United States. The current controversy is not the first – nor will it be the last – time that executive compensation has sparked outrage and led to regulation on both sides of the Atlantic. In th...

Manuscript Type: Empirical Research Question/Issue: The paper investigates the determinants of shareholder voting and its relation to CEO pay in the UK. The context of the study is the Directors' Remuneration Report (DRR) Regulations of 2002. This legislation gave shareholders a mandatory non-binding vote on boardroom pay in the UK. Research Findin...

This paper investigates shareholder voting in the UK. The Directors’ Remuneration Report (DRR) Regulations of 2002 gave shareholders a mandatory non-binding vote on boardroom pay. First, using data on about 50,000 resolutions over the period 2002 to 2007 we find that less than 10% of shareholders abstain or vote against the mandated Directors’ Remu...

We compute and compare risk-adjusted pay for US and UK CEOs, where the adjustment is based on estimated risk premiums stemming from the equity incentives borne by CEOs. Controlling for firm and industry characteristics, we find that US CEOs have higher pay, but also bear much higher stock and option incentives than UK CEOs. Using reasonable estimat...

Executive Overview Executive compensation consultants are investigated using data from the United States and the United Kingdom. The study yields a number of findings. First, CEO pay is generally greater in firms that use compensation consultants, consistent with a rent-extraction theory of executive pay. Second, the amount of equity used in the CE...

- This paper addresses three weaknesses in the literature on new organizational forms: the limited mapping of the extent of contemporary organizational change; confusion about how contemporary changes link together; and the lack of systematic testing of the performance consequences of this kind of change. Drawing on a large-scale survey of organiza...

This exploratory paper examines the relationship between the remuneration of the highest paid director and company performance in the privatized utilities. Four conclusions regarding the structure of top directors' pay emerge from the analysis. First, the salary plus bonus remuneration of top directors in the privatized utilities has increased by 1...

This study investigates the relation between CEO turnover and firm performance in China's listed firms. The study examines how the sensitivity of CEO turnover to firm performance is moderated by the private control of firms, the presence of a majority shareholder and the presence of independent directors on the board. Using a panel of about 1200 Ch...

This study investigates the economic, ownership and governance determinants of executive compensation and CEO equity incentives in China’s listed firms. Consistent with the agency theory, we find that executive compensation is positively correlated with firm size, performance, and growth opportunities. CEO incentives are negatively associated with...

In this paper we investigate the ownership and control of British firms using recent techniques from computational graph theory. In particular, we analyze the `small-world' properties of UK company ownership and the corporate elite. A `small-world' is characterized by short `path-lengths' (actors are linked by a short chain of acquaintances) and hi...

We propose ranking the importance (centrality) of boards of directors using a variant of the PageRank algorithm from computational graph theory. PageRank is at the heart of the immensely successful Google web search engine and, we argue, can be naturally extended to social network settings. Using tools from graph theory, we represent the board of d...

Executive compensation consultants are investigated using data from the United States and the United Kingdom. The study yields a number of findings. First, CEO pay is generally greater in firms that use compensation consultants, consistent with a rent-extraction theory of executive pay. Second, the amount of equity used in the overall compensation...

In this paper I investigate the compensation received by executives who are also the founders of their firms. The paper uses data from about 3000 publicly traded US firms over the years 2003 to 2005. I find that on average founder-CEOs earn significantly less than non-founder CEOs (by approximately 25%). The wage-discount of CEO founders is offset...

This paper examines bureaucratic structures and the interplay of race, place and institutional ethics involved in a process of establishing a multi-cultural research project with Aboriginal peoples in a Canadian urban context. The paper focuses on the way that one of Canada's national research councils (SSHRC) has attempted to respond positively to...

We demonstrate the importance of graph theory for understanding boards of directors. Specifically, we focus on the 'small world' phenomenon. Our empirical results show that a random graph model is remarkably good at explaining board structure and connectedness in the United States, the United Kingdom and Germany. Although there are small-world trai...

The recent spate of corporate scandals worldwide has again raised serious concerns about the quality of corporate governance. We examine the governance effects on investment expenditure in the year of CEO retirement. Based on a sample of the 460 largest UK listed companies during 1990–1998, we find no evidence of changes in capital or research and...

Why do firms allow their executives to accept outside directorships? Are firms acting in the best interests of their shareholders by allowing them to do so? We develop a theoretical model where accepting an outside directorship alters the CEO's effect on the value of the home firm. Our model illustrates that executives will choose to spend more tim...

The objective of a properly designed executive compensation package is to attract, retain, and motivate CEOs and senior management. The standard economic approach for understanding executive pay is the principal-agent model. This paper documents the changes in executive pay and incentives in U.S. firms between 1993 and 2003. We consider reasons for...

Books reviewed: Marx's Revenge by Meghnad Desai. Verso, London and New York, 2002, Reviewed by Andrew Glyn, University of Oxford, Bob Sutcliffe, Bilbao United We Stand: A History of Britain's Trade Unions by Alastair J. Reid. Allen Lane, London, 2004, Reviewed by David Metcalf, London School of Economics Personnel Economics, (eds.) Edward P. Lazear...

This paper provides a systematic empirical analysis of the effects of merger and acquisition activity on profitability and firm-level employee remuneration in the UK, using a specially constructed database for the period 1979–91. It finds that both profitability and wages rise following acquisition, and firms that merge within the same industry div...

In this paper we present a random graph model to explain the network structure of boards of directors. We investigate the conditions under which corporate boards can be said to be a "small-world". Our empirical results show that the random graph model is remarkably good at explaining board structure and connectedness in the United States, the Unite...

This study uses a sample of IPO firms to investigate the relation between the compensation committee, CEO compensation and CEO incentives. We investigate two theoretical models: the three-tier optimal contracting model and the managerial power model. We find support for the three-tier agency model. The presence of significant shareholders on the co...

The recent spate of corporate scandals worldwide has again raised serious concerns about the quality of corporate governance. This paper investigates the role of the board and stock compensation in constraining discretionary reductions in capital expenditure at the year of CEO retirement. Based on a sample of the 460 largest UK listed companies dur...

This study investigates executive compensation, corporate governance and the determination of CEO equity incentives in US entrepreneurial high technology firms. We find the following. First, CEO equity incentives in these new enterprise firms are twenty times larger than that which previous large firm studies have found. Second, both economic facto...

This paper provides a systematic empirical analysis of the effects of merger and acquisition activity on profitability and firm-level employee remuneration in the UK, using a specially constructed database for the period 1979-91. It finds that both profitability and wages rise following acquisition, and firms that merge within the same industry div...

This article summarises the views of 342 company chairmen at London-listed companies of all sizes on issues of corporate governance and directors’ remuneration. In the wake of the Hampel Committee Report, the authors used a fax survey to canvass their views on a range of topics including accountability, business prosperity, rewarding non-executives...

We investigate boardroom governance using UK historical data for 1935. We demonstrate that there is a negative relationship between risk and incentives in this year. Prior research has produced anomalous results (Prendergast, 2002). Second, we show that average (median) board ownership of ordinary shares is about 7.95% (2.88%). Heuristically this f...

This paper examines the use and consequences of shared compensation plans (profit sharing, profit related pay, SAYE schemes and company stock option plans) in a sample of UK workplaces and firms in the 1990s. The use of these plans has increased over time, in part in response to government programs. The evidence shows that companies and workplaces...

This paper evaluates the empirical relationship between top executive turnover and firm performance. Based on a sample of the 460 largest UK listed companies during the period 1990-1998 we establish an inverse and robust statistical relation between the probability of a management change and a firm's performance: top executives are fired for poor p...

This paper provides a systematic empirical analysis of the impact of foreign ownership on productivity and wages in the United Kingdom. Using a specially constructed database for the period 1989–1994, it uses ownership change (acquisition) to control for unobserved differences between plants. It finds that foreign firms pay equivalent employees 3.4...

This paper considers the empirical determinants of the quality of information disclosed about directors' share options in a sample of large companies in 1994 and 1995. Policy recommendations, consolidated in the recommendations of the Greenbury report, argue for full and complete disclosure of director option information. In this paper two modest c...

This paper provides a systematic empirical analysis of the effects of take-over and merger activity on firm employment in the United Kingdom using a specially constructed database for the period 1967–1996. Our results indicate that significant rationalisations in the use of labour occur as firms reduce joint output and increase efficiency post-merg...

This paper provides a systematic empirical analysis of the employment effects of hostile takeovers in the United Kingdom for the period 1983–1996. It finds no evidence for distinguishing between friendly and hostile acquisitions in terms of their impact on labour demand. Indeed, each type of transaction appears to have an immediate negative impact...

This study tests the implications of tournament theory using data on 100 U.K. stock market companies, covering over 500 individual executives, in the late 1990s. Our results provide some evidence consistent with the operation of tournament mechanisms within the U.K. business context. Firstly, we find a convex relationship between executive pay and...

Recent initiatives for modernising local government have ignored the potential contribution of parish and town councils. This article critically examines English parish and town councils in the context of the current debate about the need for government to be more responsive to community needs. It considers measures to enhance the capacity of these...

This paper documents the incidence of modern pay practices in UK companies. In particular we show that share-based compensation schemes have grown in popularity and are now in operation in half our sample of companies. The results also reveal three quarters of companies operating individual performance related pay schemes and a large growth in the...

This paper examines the impact of information disclosure on the valuation of CEO options and the incentives created by those options. Prior executive compensation research in the US has made assumptions about key input variables that can affect the calculation of option values and financial incentives. Accordingly, biases may have ensued due to inc...

In March 2001 the government announced that new disclosure rules relating to UK boardroom pay would be introduced. This paper critically evaluates these proposals. The new proposals emerged from the government’s Directors Remuneration consultative document issued in July 1999. The current paper makes the following contributions to the governance li...

An examination of insider trading before and after the announcement of Credit Watch placements sheds new light on the study of both bond rating changes and insider trading. This paper utilizes Credit Watch placements classified by 11 identifiable trigger events for the years 1981-1990. We find significant insider purchases before positive implicati...

We document differences in CEO pay and incentives in the US and the UK for the fiscal year 1997. After controlling for size, sector and managerial position, CEOs in the US earn 35% higher cash compensation and 121% higher total compensation (including share options, etc.). Incentives, too, are higher in the US. The calculated effective ownership pe...