Do Career Shares improve CEO performance? Evidence from FTSE 350

This paper offers a technical exploration of the empirical ramifications of adopting the Career Shares approach to long-term incentives - a proposal that has emerged from the discussion of the structure of incentive pay in the light of the recent financial crisis. By simulating the impact of such a design of long-term incentives in the context of those FTSE 350 CEOS whose careers terminated between 1993 and 2008, it is shown that Career Shares automatically introduce a 'settling-up' effect that adjusts for late-career or post-career periods of poor performance. The adoption of such an arrangement would require remuneration committees to adjust the overall remuneration package in the light of tax and risk bearing consequences that result. This paper offers the first attempt to confront an interesting and promising new idea (Career Shares) with empirical data that reflects the actual careers followed by a group of CEOs.