| This interactive seminar will focus on CEO renumeration and dismissal policies and presents the results of two recent research projects of leading scholars in this area. We highlight the topic, major research outcomes, and discuss the policy implications of each study from a multi-disciplinary perspective. |
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| Presenters: |
| Angelien Kemna, School of Economics, Member EITC, Erasmus University |
| Nikos Kavadis, Rotterdam School of Management, Member EITC, Erasmus University |
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| Coordinator: |
| Ernst Verwaal, everwaal@rsm.nl |
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| Date, time and location: |
| December 17th, 2008 (Wednesday), 14.00 - 17.15 hours, Room H17-01, Erasmus University Rotterdam |
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| Registration: |
| Participation is free, but because of limited attendance registration is needed. Please submit your registration by a short email to info@toezichtencompliance.nl or register at www.toezichtencompliance.nl |
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| Program overview |
| 13.30 - 14.00 | Registration | | 14.00 - 14.15 | Introduction | | 14.15 - 15.15 | Long Term Remuneration for Top Managers | | | Excessive executive compensation caught a lot of media attention. Rijkman Groenink, as CEO of ABN Amro, received over €25 million from performance related pay when he dismantled and sold his company to a consortium of banks. Similarly, but significantly smaller than Groeninks golden parachute, Wagenaar, as CEO of IT company Getronics received the substantial total of €2,4 million when he sold his company to its main competitor, KPN. Among all corporate finance topics, effective and fair remuneration policy is currently one of the most prominent dilemmas. Ever so often an incident of disproportional executive pay fires up a lively debate in media, politics and society in which the nature of these events is questioned. Assuming these are no incidents, but rather structural flaws in remuneration design, this would imply that current schemes are unable to accomplish maximal performance at minimal costs. Accordingly, shareholders’ wealth is not maximized either. Based on het recent scholarly research, Angelien Kemna will provide insight in the value of the current schemes over time and to recommend alternative remuneration schemes that can mitigate some of the undesirable effects. | | 15.15 - 15.30 | Break | | 15.30 - 16.30 | What explains CEO Dismissal in Large Corporations? | | | In this presentation, Nikos Kavadis will present results from his research in collaboration with M. Wiersema (University of California) and Y. Zhang (Rice University) on the impact of business diversification on the likelihood of CEO dismissal. Applying an agency theoretical perspective of what comprises shareholder wealth maximization strategies, this research shows that the board evaluates the CEO based not only on firm performance results, but also on the CEO’s ex-ante choice of strategy for the firm. The results also demonstrate that experience-related factors matter in terms of the board’s propensity to undertake disciplinary action against the CEO. In particular, finance experience for the CEO and on-going experience as CEO in another company for outside board directors reduce the board’s propensity to dismiss the CEO, under conditions, which would otherwise favor CEO dismissal. Implications for board governance will be presented in the session and submitted for discussion. | | 16.30 - 17.15 | Drinks |
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