Regulatory Developments in Executive Remuneration After the Financial Crisis in the UK and the US
Finansal Kriz Sonrası İngiltere’de ve Amerika’da Yönetici Ücret Düzenlemelerindeki Gelişmeler
Ekrem SOLAK
This article considers the regulation of executive remuneration in public companies after the 2008 financial crisis from a comparative perspective. Executive remuneration is considered as a contributing factor to the global financial crisis. Subsequently, excessive executive pay has caused the public outrage in particular during the crisis and this situation has led regulators around the world to seek an effective way of how to designate executive remuneration. Therefore, there is a need to question the premise that executive remuneration is a way to align interest of shareholders and managers. The paper finds that it is a source of agency costs rather than a tool reducing agency costs in public companies. Accordingly, the article analyses the regulatory approaches to executive compensation and reform proposal across the UK and US in order to consider the implications for future directions in the corporate governance law.
Corporate Governance, Executive Remuneration, Non-executive Directors, Shareholder Activism.
Makale, 2008 finansal krizinden sonra halka açık şirketlerdeki yönetici maaş düzenlemelerini karşılaştırmalı hukuk penceresinden incelemektedir. Yönetici maaşları, son finansal krizin nedenleri arasında değerlendirilmektedir. Dolayısıyla, bu konu çok fazla tepki çekmiş ve düzenleyici kurumların, yönetici maaşlarını etkili bir şekilde nasıl düzenleyeceklerini araştırmalarına neden olmuştur. Bu yüzden, yönetici ücret sözleşmelerinin pay sahipleri ile yöneticiler arasındaki çıkar çatışmasını azalttığı yönündeki varsayımın tekrar incelenmesi gerekmektedir. Makale, Amerika Birleşik Devletleri ve Birleşik Krallık’taki şirket ücret sözleşmeleri ve kurumsal yönetim kuralları kapsamında meydana gelebilecek müstakbel değişiklikleri anlayabilmek için de reform tekliflerini inceleyecektir.
Kurumsal Yönetim, Şirketler Hukuku, Yönetici Ücret Sözleşmeleri, Bağımsız Yöneticiler, Pay Sahiplerinin Yönetime Katılması.
I. INTRODUCTION
Executive remuneration is one of the core corporate governance problems. It is not surprising that executive remuneration has once again come under the regulatory spotlight after the financial crisis. Public anger at high pay for managers has prompted regulators to find an effective response to the executive remuneration problem.1
It is not the first time that executive remuneration has become a matter of concern to corporate law: it has been a concern for a long time. Until the early 1990s, it had long been recognised as the inherent source of conflict of interest because managers and directors set their own salaries. In the case of public companies, generosity of directors to CEOs and senior managers led excessive executive remuneration because the money paid to executives is not directors’ own. The reluctance of courts to make a second guess on the level of executive pay to be reasonable caused this problem to be unlikely soluble through traditional means.2
In the 1990s, the new approach, optimal contracting theory, argued that the problem was not related with management’s ability to set their remuneration but rather the failure of executive pay arrangements to give adequate incentive to management to pursue shareholders’ interests.3 This interpretation construed pay for performance contracts as a tool to achieve alignment of the interests of managers and shareholders by giving appropriate incentives to management.4 Thereafter, scholars mainly focussed on the issue of how to design optimal remuneration contracts.5 The pay for performance approach also justified executive remunerations, providing the prospect for reward for the success of the company and penalties for the inferior performance of the company. In short, executive remuneration has transformed from a corporate governance problem to a solution.
