Control and directors' remuneration in large British companies: An empirical investigation of directors' shareholdings and remuneration, and the implications of remuneration patterns for managerial theories of the firm.

摘要

Literature on the divorce of ownership from control hasudemphasised the declining proportion of shares owned by salariedudmanagers who control large companies. Because these salariedudmanagers have negligible proprietarial interest in the companiesudthey manage, some writers have suggested that they will haveuddifferent motives to owner-managers. In particular, managers'uddirect pecuniary interests may cause them to pursue company growthudat the expense of profit, for managers' salaries tend to be relatedudto the size of the companies which they manage rather than theudprofitability of those companies. These alternate motivations wereudincorporated in various managerial theories of the firm developed inudthe late 1960's which emphasised company growth as a key objective.udAn investigation of the shareholdings and salaries of theuddirectors of major British companies confirms that the proportionudof total shares held by company directors has fallen over the years,udthough it is argued that shareholdings are still large enough toudallow directors to exercise effective control over their companies.udIn addition, while the proportion of total shares held by directorsudis small, these shareholdings are often large in absolute terms andudconstitute a significant source of directors' income, though theudsize of directors' shareholdings varies considerably betweenudindustries. Combined dividend income and capital appreciation ofudshareholdings match the remuneration which directors receive asudsalary income. It is argued that these profit-related incomeudelements are sufficiently large to cause directors to attachudpriority to profitability goals. This proposition is exploredudthrough statistical analysis of the relationship between directors'udremuneration and company performance. Regression results show thatudas the definition of directors' remuneration is broadened to includeuddividends and capital appreciation as well as salary, company sizeudvariables diminish in importance as determinants of remuneration andudprofitability variables predominate. Managers do have an incentiveudto pursue profitability.