英语论文网

heir monitoring
activities are more likely to exceed the costs that they incur (Shleifer and Vishny, 1986).
However, some authors suggest that institutional investors rarely take action in corporate monitoring
because they view liquidity as more important than building up the concentrated ownership
required to have an influence on corporate management (Coffee, 1991).
Institutional investors hold a substantial ownership of total corporate equity in the UK. According
to the ONS (2004) as of December 2003 institutional investors owned around 80% of UK
equity. Clearly, the potential role of institutions in UK corporate governance is an important area
to explore. However there are only a few studies investigating how effective institutions are in
monitoring and disciplining UK corporations (see, Georgen and Renneboog, 2001; Stapledon,
1996). The findings from those studies suggest that institutions are passive investors; monitoring
by institutions is not an important governance mechanism for UK corporate management.
However, one can observe that substantial changes have occurred in the practices of institutional
investors. According to a report by the committee inquiring into UK vote execution voting
levels at UK companies moved from 20% in 1990 to 50% in 1999.5 Some institutions started publicly
targeting corporations through the media and publicly expressed their dissatisfaction with
executive compensation practices in terms of levels and performance sensitivities. For example, in
4 In our regression model, we also control for other firm-specific variables, such as firm performance. Our findings
show that firm performance measured by stock return (also industry-adjusted stock return) or earnings per share (also
industry-adjusted earnings per share) does not have a significant impact on CEO compensation. However, one should
note that the data are for only 1 year and this may affect the results, especially the sensitivity of compensation to firm
performance.
5 However, this is still in substantial contrast to the US, where voting turnout can easily reach 70–80% at many companies
(Bethel and Gillan, 2002).
N. Ozkan / J. of Multi. Fin. Manag. 17 (2007) 349–364 363
significant impact on the total CEO compensation level. Our results also show that as blockholder
ownership increases the total CEO compensation declines.
We have also done the analysis using dummy variables for the presence of institutional ownership,
four largest institutional ownership, block-holder ownership, directors’ ownership and
CEO ownership. The results show that the actual percentage held plays a role, but not the presence
of ownership. The coefficients for dummy variables for institutional ownership, four largest
institutional ownership, block-holder ownership, directors’ ownership and CEO ownership are
not statistically significant. The impact of other corporate governance variables and firm-specific
variables does not change. For brevity, we do not report those findings.
5. Conclusion
This paper provides additional empirical evidence on the determinants of CEO compensation
level for a sample of 414 listed UK companies for the fiscal year 2003/2004. The results indicate
that corporate governance mechanisms influence the level of CEO compensation level.20 The
findings suggest that larger firms and firms with higher growth opportunities pay their CEOs
highe