Executive compensation: Evidence from the UK and Germany

This article concerns the determination of executive pay in the UK and Germ any. These economies have very different corporate governance structures an d we examine whether this has implications for executive pay outcomes. Our research shows that average pay in the UK was about pound 391,000 in 1994, compared to about pound 200,000 in Germany. Our data, however, have a time series dimension. Pay has increased in both economies over time, but the UK has had a faster rate of growth in the post-1980s period. Importantly, in our time period each economy had a different structure of pay: VK CEOs rece ived stock options (which can contribute to the growth rate) whereas German executives-until recently-did not. The gap between CEO pay and that of oth er employees is higher in the UK than in Germany. Regression results reveal a positive and significant association between cash pay and company perfor mance in both countries. However, we show that there is cross-section varia tion in the pay-performance relation, a result that many prior studies have overlooked. (C) 2000 Published by Elsevier Science Ltd.