Premium
Shifting the Goalposts? Analysing Changes to Performance Peer Groups Used to Determine the Remuneration of FTSE 100 CEOs
Author(s) -
Skovoroda Rodion,
Bruce Alistair
Publication year - 2017
Publication title -
british journal of management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.407
H-Index - 108
eISSN - 1467-8551
pISSN - 1045-3172
DOI - 10.1111/1467-8551.12209
Subject(s) - selection (genetic algorithm) , remuneration , business , accounting , selection bias , peer group , composition (language) , peer effects , shareholder , corporate governance , psychology , social psychology , finance , statistics , linguistics , philosophy , mathematics , computer science , artificial intelligence
This paper examines year‐on‐year changes to the composition of performance peer groups used for relative performance evaluation in setting CEO pay in FTSE 100 companies and finds evidence of peer selection bias. The authors find that firms keep their peer groups weak by excluding relatively stronger performing peers. They also show that peer selection bias is less pronounced in firms with higher institutional investor ownership, which suggests that institutional investors might be aware of the risks of peer selection bias. The results suggest that peer group modifications can be viewed, at least in part, as an expression of managerial rent‐seeking.