Overview

Executive Compensation will provide a reader on the many exciting but often unexplained features of how firms remunerate their executive officers. Drawing on economic theory the module will examine how executive compensation contracts provide incentives for executives to behave in specific ways, what the benefits are of a heterogeneous board of directors, what effects might one expect from gender differences, how firms can set their compensation policy to enhance effort, and the increasing importance of culture in affecting executive behaviour and firm performance. The module will help to develop understanding by considering whether theoretical predictions are supported by empirical evidence.

Assessment Strategy

Excellent A- to A+ (70%+) Outstanding Performance. The relevant information accurately deployed. Excellent grasp of theoretical/conceptual/practice elements. Good integration of theory/practice/information in pursuit of the assessed work's objectives. Strong evidence of the use of creative and reflective skills.

Good B- to B+ (60-69%) Very good performance. Most of the relevant information accurately deployed. Good grasp of theoretical/conceptual/practical elements. Good integration of theory/practice/information in pursuit of the assessed work's objectives. Evidence of the use of creative and reflective skills.

Fair C- to C+ (50-59%) Much of the relevant information and skills mostly accurately deployed. Adequate grasp of theoretical/conceptual/practical elements. Fair integration of theory/practice/information in the pursuit of the assessed work's objectives. Some evidence of the use of creative and reflective skills.

Threshold D- to D+ (40-49%) No major omissions or inaccuracies in the deployment of information/skills. Some grasp of theoretical/conceptual/pra

Learning Outcomes

• Appreciate how board diversity and director heterogeneity can affect firm performance outcomes.

• Critically evaluate whether executive compensation arrangements had failed and were a causal factor in the global banking crisis of 2008-09.

• Demonstrate comprehension of the theories that explain the growth in executive pay and why firms willingly reward their CEOs with what many commentators suggest is excessively large compensation packages.

• Exhibit a critical awareness of how the incentive structures that are implicit in executive compensation contracts affects the behaviour of executive officers, which, in turn, affects firm performance outcomes; and to consider whether firms can use compensation policy to deliver performance gains.

• Review regulatory actions and proposals to reform compensation arrangements including the emerging importance of corporate culture within firms.