Examining CEO compensation and financial performance in the U.S.property casualty insurance industry.

摘要

Boards of directors are charged with establishing chief executive officers' (CEO) compensation packages within the U.S. property casualty insurance industry. Boards of directors have a limited understanding of the relationship between CEO compensation and the financial performance of a firm. Examining the relationship between CEO compensation and financial performance will provide boards of directors with more information to align CEO compensation packages according to the firm's financial performance. The purpose of this quantitative, correlational study was to examine the relationship between CEO compensation and financial performance in the U.S. property-casualty insurance industry (USPCI). The study was guided by agency theory and focused the research questions on examining the relationship between annual revenue and return on equity (ROE) and CEO total incentive compensation, measured by salary, stocks, bonuses, and options awards, while controlling for firm size, CEO age, and CEO tenure within the U.S. property-casualty insurance industry. Secondary, archival data was collected from Compustat and Standard and Poor's Capital IQ databases. A sample of 190 total firm years from 2010 -- 2014 were examined in the study. Hierarchical multiple regression was used to analyze the data and identify any variables with statistical significance to the model. CEO age and annual revenue revealed a significantly positive relationship to CEO total compensation, while ROE, CEO tenure, and firm size provided no indication of a relationship to total CEO compensation. Positive implications of this research include aiding USPCI carriers in strategic planning and understanding how CEOs make decisions, how to compensate CEOs, and how to more efficiently understand gross annual revenue within the USPCI industry.