Does codetermination affect the composition of variable versus fixed parts of executive compensation? - An empirical analysis for listed companies in Germany
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Date
2015
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Abstract
Contrary to previous literature we hypothesize that interests of labor may well –
like that of shareholders – aim at securing the long-run survival of the firm.
Consequently, employee representatives on the supervisory board could well have
an interest in increasing incentive-based compensation to avoid excessive risk
taking and short-run orientated decisions. We compile unique panel data on
executive compensation over the periods 2006 to 2011 for 405 listed companies and
use a Hausman-Taylor approach to estimate the effect of codetermination on the
compensation design. Finally, codetermination has a significantly positive effect on
performance-based components of compensation, which supports our hypothesis.
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Keywords
Executive Compensation, Hausman-Taylor, Corporate Governance, Principal-Agent Theory, Codetermination