Title: CEO target compensation and performance standards in privately- and publicly-held firms through a disclosure regulation change

Authors: Patrice Gelinas, Michel Magnan, Sylvie St-Onge

Addresses: School of Administrative Studies, York University, 4700 Keele Street, Atkinson Building, Office 254, Toronto, ON, M3J 1P3, Canada. ' John Molson School of Business, Concordia University, 1455 de Maisonneuve Blvd., West Montreal, Quebec, H3G 1M8, Canada. ' HEC Montreal, 3000 chemin de la Cote-Sainte-Catherine, Montreal, Quebec, H3T 2A7 Canada

Abstract: In this paper, the authors investigate whether CEOs from publicly-traded firms have higher target bonuses, higher target total cash compensation and smoother abnormal bonuses than CEOs in private firms. The authors also analyse the impact of disclosure regulation on performance standards that boards set for CEOs of both publicly-traded and private firms. Relying on samples containing both publicly-held and privately-owned firms, the authors show that the advent of mandated disclosure of executive compensation has imposed an additional compensation cost upon the shareholders of publicly-held firms without necessarily leading managers to achieve higher performance standards. The results suggest that executive compensation determination may reflect, beyond agency, managerial power and rent extraction considerations, both institutional (impression management) and governance pressures.

Keywords: executive compensation; disclosure regulation; performance standards; institutional theory; private firms; publicly-traded firms; abnormal bonuses; governance; CEOs; target bonuses; total cash compensation; abnormal bonuses.

DOI: 10.1504/IJBGE.2009.023330

International Journal of Business Governance and Ethics, 2009 Vol.4 No.3, pp.222 - 249

Published online: 19 Feb 2009 *

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