We examine whether third-party endorsement and institutional trust can mitigate the potential negative effects of higher levels of executive compensation on the likelihood of future donations to a nonprofit organization. Using an experimental design, we find support for prior expectations that paying higher executive compensation reduces the likelihood of future individual donations. We also find that this negative effect is only significant in the absence of a third-party endorsement so that individual donations significantly decrease when the nonprofit pay is high relative to moderate executive compensation levels. Finally, the likelihood of future individual donations is higher when institutional trust is high. However, high institutional trust does not validate the payment of higher levels of executive compensation. Our results have theoretical and practical implications by showing that nonprofits are better off paying moderate executive compensation levels but not paying too much if they have not attracted respectable third-party endorsers.

This study examines how the managerial interpretation of incentive arrangement affects corporate engagement in social areas, as reflected in corporate social performance, from two interrelated perspectives: the political influence view and the normative agency view. Building the theoretical framework on state-owned enterprise (SOE) executives' dual-career tracks perspective, we contend that economic factors (performance decline and relative pay gap) and political factors (socialist imprints and political career horizon) could divergently reshape the interpretation of incentive arrangement on corporate social performance. Using ‘Pay Ceiling Order’ as a quasi-natural experiment context, a secondary analysis, and a controlled experiment reveal that compensation restriction on top executives causes a decrease in corporate social performance. This relationship is weakened when there are stronger socialist imprints inherited by a focal firm and when the executives have a longer political prospect. In contrast, the relationship is strengthened when firms face severe performance declines and when the executives' compensation is relatively lower than peers. The findings show that compensation is an indispensable incentive joining with political and economic factors, enabling SOEs to engage in social areas. We discuss the implications of understanding top executive incentives with incentive arrangements and how the government purpose influences top executive responses to compensation incentive in ways that matter for long-term social value.

In this study, we explore how early career advancement affects the gender pay gap among top executives and argue that an employee's age at attainment of an executive position serves as a signal that helps reduce biases toward women, thereby lowering gender pay differentials. We analyze career data of 803 executives from public high-technology manufacturing firms in the United States by collecting information from ExecuComp, Marquis Who's Who, LinkedIn, and Bloomberg. Our results indicate that attaining a top management position at a young age has a positive effect on pay, particularly among women, and this effect is due to the variable portion of compensation, which represents a large proportion of compensation among top executives. Further, recent research has identified a pay premium among high-potential female managers, although its key drivers remain unclear. This paper explores age as an observable signal that influences this premium and reduces the gender pay gap.

We investigate the impact of professional networks on men's and women's earnings, using a dataset of European and North American executives. The size of an individual's network of influential former colleagues has a large positive association with remuneration, with an elasticity of around 21%. However, controlling for unobserved heterogeneity using various fixed effects as well as a placebo technique, we find that the real causal impact of networks is barely positive for men and significantly lower for women. We provide suggestive evidence indicating that the apparent discrimination against women is due to two factors: first, both men and women are helped more by own-gender than other-gender connections, and men have more of these than women do. Second, a subset of employers we identify as ‘female friendly firms’ recruit more women but reward networks less than other firms.

Executive stock options (ESOs) are widely used to reward employees and represent major items of corporate liability. The International Accounting Standards Board IFRS9 financial reporting standard which came into full effect on 1-Jan 2018, along with its Australian implementation AASB9, requires public corporations to report their fair-value cost in financial statements. Reset ESOs are typically issued to re-incentivise employees by allowing the option to be cancelled and re-issued with a lower exercise price or later maturity. We produce a novel analytical Reset ESO valuation consistent with the IFRS9 financial reporting standard incorporating the simultaneous resetting of vesting period, exercise window, reset level and maturity. We allow for voluntary and involuntary exercise. Our analytical result is expressed solely in terms of standardised European binary power option instruments. Using the multi-state mortality model of Hariyanto (2014, Mortality and disability modelling with an application to pricing a reverse mortgage contract, PhD thesis, University of Melbourne), we estimate longitudinal disability and death transition probabilities from cross-sectional data. We determine survival functions for pre-vesting forfeiture or post-vesting involuntary exercise for use with weighted portfolios of our formulae to illustrate the effect of survival on the fair value. We examine the IFRS9 method of valuation using expected time to option exercise and demonstrate a consistent overestimation of fair value of up to 27% for senior executives.

The link between firm corporate social performance (CSP) and executive compensation could be driven by a sorting effect (a firm’s CSP is related to the initial levels of compensation of newly hired executives), or by an incentive effect (incumbent executives are rewarded for past firm CSP). Existing empirical work focuses exclusively on the incentive effect. In contrast, in this paper we explore the sorting effect of firm CSP on the initial compensation of newly hired executives. In doing so, we develop a novel theoretical approach based on an integration of stakeholder theory and human capital theory, suggesting a positive association between the initial compensation of executives and firm CSP strengths and concerns. It also suggests that the strength of this relationship varies between different executive roles (as a function of stakeholder-management responsibilities). We find support for this theoretical framework in a large sample of newly-hired executives employed by Standard & Poor 1500 firms.

The article discusses the most recent corporate governance developments both in Switzerland, in the aftermath of the adoption of the so-called ‘Anti-Rip-off’ Initiative, and in the EU, based on the Action Plan ‘European Company Law and Corporate Governance’. Compared with previous EU Green Papers, the reforms envisaged in the Action Plan issued by the European Commission on 12 December 2012 are moderate and rather cautious. In Switzerland, the adoption of the ‘Anti-Rip-off’ Initiative on 3 March 2013 was a game-changing political decision for the future development of corporate governance in listed corporations. There are many parallels between the most recent developments in Switzerland and the EU. Both jurisdictions see the enhancement of transparency and the increase of shareholders' sense of responsibility when it comes to corporate governance as key objectives. At the same time, differences are emerging between the strategies used in each jurisdiction. While the EU is strengthening both the legal position and the autonomy of shareholders, Switzerland is imposing legal obligations on shareholders to ensure appropriate engagement. This raises the fundamental question of whether the aim of sound corporate governance is better served by the enhancement of transparency and shareholder rights or by intensified legislative intervention. Against this backdrop, this comparative legal article analyses selected reform efforts to strengthen the role of shareholders and to improve transparency on the part of companies, institutional investors, and proxy advisers.