Executive compensation among Australian mining and non-mining firms: Risk taking, long and short-term incentives

Subba Reddy Yarram and John Rice

Economic Modelling, 2017, vol. 64, issue C, 211-220

Abstract: How firms determine the pay of their executive employees is a vital research area. In the Australian context, mining firms form a large portion of listed companies. These miners tend to have more volatile earnings, operate with less certainty and higher risk in relation to capital investment. We look at a sample of ASX listed miners and non-miners from 2005 to 2013. We note that miners pay their CEOs less (AUD 1m vs AUD 1.5m for non-miners) overall. However, we also note that miners tend to use enhanced contingent long-term remuneration arrangements to significantly boost the pay-performance relationship compared to non-miners particularly during the pre-GFC period. Curiously, non-miners tend to have more generous short-term contingent arrangements linking executive pay and performance. The GFC, as an event, has adversely impacted these arrangements, lessening the generosity of pay-performance among miners, while enhancing these arrangements among non-miners. Overall, the results of the study provide support for optimal contracting theory and do not generally support the managerial power approach for both mining and non-mining firms.

Keywords: G3; M520; C33; Q33; Corporate governance; Executive compensation; Panel data models; Resource booms (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:64:y:2017:i:c:p:211-220

DOI: 10.1016/j.econmod.2017.03.034

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