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- Creators: Casas-Arce, Pablo
- Creators: Department of Finance
Description
Executive compensation is broken into two parts: one fixed and one variable. The fixed component of executive compensation is the annual salary and the variable components are performance-based incentives. Clawback provisions of executive compensation are designed to require executives to return performance-based, variable compensation that was erroneously awarded in the year of a misstatement. This research shows the need for the use of a new clawback provision that combines aspects of the two currently in regulation. In our current federal regulation, there are two clawback provisions in play: Section 304 of Sarbanes-Oxley and section 954 of The Dodd\u2014Frank Wall Street Reform and Consumer Protection Act. This paper argues for the use of an optimal clawback provision that combines aspects of both the current SOX provision and the Dodd-Frank provision, by integrating the principles of loss aversion and narcissism. These two factors are important to consider when designing a clawback provision, as it is generally accepted that average individuals are loss averse and executives are becoming increasingly narcissistic. Therefore, when attempting to mitigate the risk of a leader keeping erroneously awarded executive compensation, the decision making factors of narcissism and loss aversion must be taken into account. Additionally, this paper predicts how compensation structures will shift post-implementation. Through a survey analyzing the level of both loss- aversion and narcissism in respondents, the research question justifies the principle that people are loss averse and that a subset of the population show narcissistic tendencies. Both loss aversion and narcissism drove the results to suggest there are benefits to both clawback provisions and that a new provision that combines elements of both is most beneficial in mitigating the risk of executives receiving erroneously awarded compensation. I concluded the most optimal clawback provision is mandatory for all public companies (Dodd-Frank), targets all executives (Dodd-Frank), and requires the recuperation of the entire bonus, not just that which was in excess of what should have been received (SOX).
ContributorsLarscheid, Elizabeth (Author) / Samuelson, Melissa (Thesis director) / Casas-Arce, Pablo (Committee member) / WPC Graduate Programs (Contributor) / School of Accountancy (Contributor) / Barrett, The Honors College (Contributor)
Created2018-12
Description
Relative performance evaluation (RPE) in Chief Executive Officer (CEO) compensation contracts entails the use of peer performance to filter out exogenous shocks and reduce exposure to risk. Theory predicts that high-quality peers can effectively filter out noise from performance measurement, yet prior empirical studies do not examine how differences in peer quality affect the use of RPE in practice. In this study, I propose a model to select peers with the highest capacity to filter out noise and introduce a novel measure of peer quality. Consistent with the theory, I find that firms with high quality peers rely on RPE to a greater extent than firms with few good peers available. I also examine the extent to which peers disclosed in proxy statements overlap with the best peers predicted by my model. I find that the overlap is positively associated with institutional ownership, use of top 5 compensation consultants, and compensation committee competence.
ContributorsCho, Jeh-Hyun (Author) / Matejka, Michal (Thesis advisor) / Kaplan, Steve (Committee member) / Casas-Arce, Pablo (Committee member) / Arizona State University (Publisher)
Created2020
Description
Does a gender earnings gap exist in Norway and the United States? Overtime, the male to female pay gap has reduced. As jobs have become more gender neutral and industrialized, males and females have been given equal rights to work. However, despite these seemingly dramatic generalizations, the pay between females and males has not equalized. It appears that a woman still faces significant obstacles to receive the same pay and respect that her male counterpart is awarded. To understand more about the gender pay gap, we must also understand the attitudes and behaviors in the work place. Adding this perspective as well analyzing the time in which a woman might be away from work to give attention to motherhood are all factors that may contribute to the gender earnings gap. Understanding these factors assist in the efforts to achieve wage equality and reduce wage differentials between males and females. A cross cultural analysis between the United States and Norway will provide additional valuable insights. The culture and economy in Norway present a stark difference to the United States. In order to better evaluate the problems and to define solutions for the earnings gap, it is essential to analyze an economy that inherently gives many more benefits to the working class.
ContributorsPage, Karlee Ann (Author) / Shropshire, Christine (Thesis director) / Jordan, Erin (Committee member) / Dean, W.P. Carey School of Business (Contributor) / Department of Finance (Contributor) / Barrett, The Honors College (Contributor)
Created2020-05