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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


ConferenceSimposio de la Asociacion Espanola de Economia (SAEe)
Abbreviated titleSAEe
Internet address


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


Simposio de la Asociacion Espanola de Economia (SAEe)


Barcelona, Spain

Event: Conference

ID: 43695174