Executive Compensation Case Study

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Executive compensation has attracted wide attention from both theoretical and empirical researchers in the past two decades. Berle and Means (1932) first introduced the idea of chief executive officer (CEO) pay as a mechanism to align the interests of management with those of shareholders. A key issue of modern corporate governance is how to design compensation packages that give appropriate incentives to CEOs to maximise firm performance. To design an appropriate compensation package, the usual approach is to test the relationship between CEO compensation and firm performance, as well as other firm factors, such as characteristics of corporate governance and operations.
Most past research is based on data from developed countries, such as
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In comparison, the concept of corporate governance in Vietnam is relatively new and not well understood. The economic reform that began in Vietnam in 1986 has achieved impressive progress in last decades. Enterprise reform has been an important component, which has led to significant progress in developing a modern corporate governance system. The major driver of continuing enterprise reform is the reform of SOEs, which seeks to strengthen the profit motive. Much of the policy content concerning the recent processes of change in Vietnam’s ownership system and enterprise reform is related to the guiding principles and the manner in which the corporate governance system is to be gradually structured and established. After 1986, numerous laws of enterprise were enacted that supported strongly the establishment and transformation of firms in both private and public sectors, resulting in a high-powered change of internal governance structure. As part of the process of economic reform in Vietnam, many SOEs were allowed by government to convert to shareholding companies. The establishment of the HoChiMinh Stock Exchange in 1999 and the Hanoi Stock Exchange in 2005 provide a place for firm to be listed and for investors to …show more content…
Since 2006, however, the Vietnam Securities Regulatory Commission has required all the listed firms provide total compensation of every director, supervisor, and all members of senior management. This would imply that more detailed financial information for the upper echelons of listed companies’ compensation packages is required by both the government and shareholders. It speaks to a need for more transparency of top management’s activities in setting compensation.
The main objective of this research is to examine which factors determine the level of CEO compensation as well as the change of compensation under the framework of agency theory in Vietnamese listed firms.
In order to achieve the objective, this research attempts to address the following questions:
Whether to have the relationship between CEO compensation and company performance in Vietnamese listed firms?
Which performance measures, market-based or accounting-based, account for the greatest portion of CEO compensation?
Whether past performance affects the current CEO compensation?
How ownership structure, board composition, or other factors affect CEO pay level and the pay–performance relationship?
Answering these questions is important to advance academic research and inform market investors, both of which can alleviate the agency problem to some

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