Corporate governance of executive remuneration with special reference to Bangladesh

This discussion paper focuses on corporate governance issues associated with executive compensation arrangements. An historical perspective is used to demonstrate the absence of a sound empirically-based understanding of good corporate governance practices in relation to share-based payment arrangements. The paper provides an overview of issues including the potential earnings dilution and volatility effects of the introduction of regulations affecting executive remuneration. Potential research questions have been framed addressing each of the major issues identified in this paper. It is concluded that corporate regulators should ensure they are familiar with and that they consider best practice models for corporate governance when developing new or revising existing business regulation. It is proposed that further research to remedy this deficiency would enable a more accurate assessment of the impact of management on accounting regulation and the better design and implementation of regulation.

Managerial share ownership and discretionary accruals in Australia : do independent and executive directors have different incentives?

We examine the relation between managerial share ownership (MSO) and discretionary accruals in Australia. We find a positive relation between MSO and discretionary accruals up to a certain level of MSO followed by a negative relation (inverse U-shaped). We suggest that these unique results are a result of certain Australian institutional features that are markedly different to those in the US and the UK and imply that the ownership-discretionary accruals relation is context specific with the wider corporate governance systems influencing the theorised incentive effects. We also posit that executive directors and independent directors have different ownership-discretionary accruals incentives and report results consistent with this proposition.

Elves processing Christmas orders in an office SFX

A sound design that animates elves working in an office processing Christmas orders.

Managerial share ownership and operating performance : do independent and executive directors have different incentives?

We investigate the relationship between managerial share ownership (MSO) and earnings as a measure of operating performance in Australia. To mitigate potential earnings management, we also use discretionary accrual adjusted earnings as an alternative measure of performance. We document a negative relation between MSO and performance followed by a positive relation. We suggest that these unique results are an artefact of certain Australian institutional features and imply that the ownership–performance relation is context-specific, with the wider corporate governance systems influencing the theorised incentive effects. We also posit that executive directors and independent directors have different ownership–performance incentives. Our results are consistent with this proposition and suggest that independent directors may be immune to the theorised incentive alignment or entrenchment effects associated with share ownership.

The value of executive director share ownership and discretionary accruals

Purpose – The purpose of this paper is to investigate the relation between the value of executive director share ownership and discretionary accruals.

Design/methodology/approach – This study uses a dataset of 1,173 firm-year observations drawn from 188 Australian listed companies for the period 2000-2006. The analysis is based on multivariate regression analysis and ordinary least square models were used to investigate the relation between the value of managerial ownership and discretionary accruals. The issue of potential endogeneity is addressed by using a simultaneous equation system.

Findings – A negative relation is found between value of managerial share ownership and discretionary accruals at lower levels of value of ownership, which is consistent with the theorised incentive alignment that as the managers commit more resources to their firms, stakeholders impose less contractual constraints specified in terms of accounting numbers and managers make lower accrual adjustments. After a certain level of value of ownership is attained, a positive relations seen, consistent with increased discretionary accrual adjustments associated with stakeholders anticipating managerial entrenchment. Also, it is found that these results are driven by firms with income increasing, as opposed to income decreasing, discretionary accruals.

Practical implications – Shares and options are forming an increasing proportion of executive remuneration that continues to be the subject of much debate amongst regulators and in the media. Showing that the value of share ownership may be an effective internal governance mechanism to help align incentives adds to the debate and has policy implications.

Originality/value – The paper's primary contribution is finding that the value (as opposed to proportion) of share ownership, typically representing a sizeable proportion of managers' undiversified wealth, is a potentially direct driver of theorised incentive alignment and entrenchment effects associated with share ownership.

Executive Systems Constrain the Flexibility of Online Control in Children During Goal-Directed Reaching

We examined the influence of inhibitory load on online motor control in children. A sample of 129 school children was tested: younger, mid-age, and older children. Online control was assessed using a double-step perturbation paradigm across three trail types: non-jump, jump, and anti-jump. Results show that mid-aged children were able to implement online adjustments to jump trials as quickly as older children, but their performance on anti-jump trials regressed toward younger children. This suggests that rapid unfolding of executive systems during middle childhood may constrain the flexibility with which online control can be implemented, particularly when inhibitory demands are imposed.