Corporate Strategy and Executive Compensation: A study of regulatory impact

DOI: 10.5176/978-981-08-8408-6_BizStrategy2011_36

Authors: Professor Ian Eddie

Abstract:

The relationship between corporate strategy and executive and director compensation practices of a company are investigated in this paper. The study documents recent regulatory changes to executive
compensation following the global financial crisis in a number of countries. In particular the paper examines the impact of regulatory change and discusses the policy implications of these changes for corporate governance, strategy and performance.

One of the significant outcomes from the global financial crisis has been the response by governments around the world to increase regulation of executive compensation practices and increase the transparency of disclosures regarding executive and director compensation by public corporations. The central point at issue was captured by President Obama (2008) who stated; ‘Executive compensation – unmoored from longterm performance or even reality – rewarded recklessness rather than responsibility’.