Executive compensation and earnings persistence

Journal of Business Ethics 50 (4):369-382 (2004)

Abstract
Governing boards utilize executive compensation contracts in an attempt to align executive actions with corporate goals. The objective is to ensure that executive performance provides value to the organization in terms of successful outcomes. A key performance criteria typically specified in CEO compensation contracts is earnings targets. However, using earnings as a performance evaluation may be problematic because some firms exhibit robust and sustained earnings over time (high earnings persistence), and other firms, such as high growth oriented firms, exhibit weak or sometimes negative earnings over time (low earnings persistence). Our study reveals that the effect of high earnings persistence results in firms that focus more heavily on cash compensation (salary and bonus) rather than on equity compensation (stock options, etc.) to compensate executive performance. Additionally, for firms characterized by low earnings persistence, our study indicates that cash flows from operations act as a supplementary performance measure to accounting earnings, and become increasingly important as a means to justify executive cash compensation
Keywords Philosophy   Ethics   Economic Growth   Management
Categories (categorize this paper)
DOI 10.1023/B:BUSI.0000025031.81884.ed
Options
Edit this record
Mark as duplicate
Export citation
Find it on Scholar
Request removal from index
Revision history

Download options

Our Archive


Upload a copy of this paper     Check publisher's policy     Papers currently archived: 49,066
External links

Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
Through your library

References found in this work BETA

No references found.

Add more references

Citations of this work BETA

Add more citations

Similar books and articles

A Fair Wage? Capping Executive Compensation.Julian Friedland - 2010 - Journal of Business Ethics Education 7:129-139.
The Ethics of Hedging by Executives.Lee M. Dunham & Ken Washer - 2012 - Journal of Business Ethics 111 (2):157-164.
A Moral and Economic Defense of Executive Compensation.John Dobson - 2011 - Business and Professional Ethics Journal 30 (1-2):59-70.

Analytics

Added to PP index
2009-01-28

Total views
56 ( #162,699 of 2,311,311 )

Recent downloads (6 months)
1 ( #753,648 of 2,311,311 )

How can I increase my downloads?

Downloads

My notes

Sign in to use this feature