Corporate Governance and Executive Remuneration: A Contingency Framework

Abstract

By integrating organizational and institutional theories, this paper develops a contingency approach to executive remuneration and assesses its effectiveness in different organizational and institutional contexts. Most of the executive remuneration research focuses on the principal-agent framework and assumes a universal link between executive incentives and performance outcomes. We suggest a framework that examines executive compensation in terms of its organizational contexts and potential complementarities/substitution effects between different corporate governance practices at both the firm and national levels. We also discuss the implications for different approaches to executive compensation policy such as ``soft law{''} and ``hard law.{''}