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Thomas, Randall S. --- "International Executive Pay: Current Practices and Future Trends" [2009] ELECD 409; in Dau-Schmidt, G. Kenneth; Harris, D. Seth; Lobel, Orly (eds), "Labor and Employment Law and Economics" (Edward Elgar Publishing, 2009)

Book Title: Labor and Employment Law and Economics

Editor(s): Dau-Schmidt, G. Kenneth; Harris, D. Seth; Lobel, Orly

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847207296

Section: Chapter 7

Section Title: International Executive Pay: Current Practices and Future Trends

Author(s): Thomas, Randall S.

Number of pages: 52

Extract:

7 International executive pay: current
practices and future trends* 1




Randall S. Thomas


1 Introduction
International executive compensation practices over the past 30 years can
be classified in a dualistic manner: American pay systems versus those in
the rest of the world. The US remuneration approach for top executives is
characterized by highly incentivized and lucrative compensation arrange-
ments (Cheffins and Thomas 2003; Cheffins and Thomas 2004). The size
of these payments has made American CEO pay highly controversial.
On the positive side, many commentators, including Murphy (1998, pp.
2551­5) believe that option-filled pay packages fulfill a useful function by
aligning the interests of shareholders and executives, and that the higher
risk levels associated with large option holdings justify bigger amounts of
pay. Critics, however, such as Bebchuk and Fried (2004), claim that US
CEO compensation is the product of self-serving managerial `rent extrac-
tion', with captured boards of directors paying out ridiculous amounts
to self-interested CEOs (but see Core et al. 2005). In other parts of the
world, CEO pay levels have been lower, bonus payments smaller and their
remuneration packets have contained fewer, if any, stock options.
As Cheffins and Thomas (2003) have noted, in recent years, a potential
trend has arisen toward merging these two pay structures in a global pay
regime. However, no consensus exists as to whether this convergence is taking
place and some observers, including Stabile (2001a), believe that the diver-
gence between the US and other countries will persist ...