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Executive pensions and the pay-performance relation. Evidence from changes to pension legislation in the UK

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Original languageEnglish
Number of pages28
Publication statusPublished - 2017
EventSimposio de la Asociacion Espanola de Economia (SAEe) - Barcelona, Spain
Duration: 14 Dec 201716 Dec 2017
http://www.asesec.org/simposio/

Conference

ConferenceSimposio de la Asociacion Espanola de Economia (SAEe)
Abbreviated titleSAEe
CountrySpain
CityBarcelona
Period14/12/1716/12/17
Internet address

Abstract

This paper evaluates the role of executive pensions in the relationship between executive compensation and corporate performance. As a natural experiment, we exploit a major change to the tax-free allowances governing executive pensions. This reform affected the cost of pensions for firms whose executives had accumulated pension benefits in excess of the prescribed limit. We find a strong reaction to the reform. After 6th April 2006, executives saw their defined benefit pension schemes replaced with risk-free cash payments. This imposition of an exogenous constraint on the contracting over CEO pay significantly decreased the relationship between executive pay and firm performance.

    Research areas

  • executive compensation, executive pensions, pay for performance, A-day

Event

Simposio de la Asociacion Espanola de Economia (SAEe)

14/12/1716/12/17

Barcelona, Spain

Event: Conference

ID: 43695174