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Executive incentive pay strategies in entrepreneurial UK initial public offering companies: an empirical study

Allcock, Deborah and Pass, Christopher (2006) Executive incentive pay strategies in entrepreneurial UK initial public offering companies: an empirical study. Corporate Governance, 6 (2). pp. 148-161. ISSN 1472-0701

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    Abstract

    Purpose – The purpose of this paper is to use a sample of UK entrepreneurial initial public offering (IPO)
    companies to investigate whether they change their compensation strategies as they undertake the
    crucial transformation of the business from private to public status.
    Design/methodology/approach – The paper uses the agency perspective to underpin an examination
    of the changes within the compensation packages of companies at the stage of the initial public offering,
    particularly with regard to the use of executive director incentive schemes, and compares this to ‘‘best
    practice’’ guidelines issued within the UK.
    Findings – The paper discovers that even though incentive schemes are adopted, the majority are
    unconditional and requiring only an improvement in share price and the executive to remain employed in
    order for gains to be made. The general finding is that before IPO most companies did not have an
    incentive pay scheme in place, and those that did, operated unconditional option schemes. However,
    after IPO most companies introduced an incentive pay scheme, but the majority were unconditional
    rather than conditional (i.e. schemes requiring executives to meet pre-determined performance criteria
    – as recommended by ‘‘best practice’’ guidelines).
    Originality/value – The paper exposes that, contrary to ‘‘best practice’’ guidelines and regulations,
    many of these schemes reward executives unconditionally with the only factor being them remaining in
    employment over the vesting period. Despite ‘‘best practice’’ and regulations, firms still appear to be
    defensive and protect the executives from rigorous scrutiny by shareholders.

    Item Type: Article
    Additional Information: UoA 35 (Accounting and Finance) © Emerald Group Publishing Limited
    Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
    H Social Sciences > H Social Sciences (General)
    H Social Sciences > HB Economic Theory
    Schools: The Business School
    The Business School > Financial Ethics and Governance Research Group
    Related URLs:
    Depositing User: Sara Taylor
    Date Deposited: 20 Dec 2007
    Last Modified: 28 Jul 2010 19:22
    URI: http://eprints.hud.ac.uk/id/eprint/491

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