Measuring Compliance with Executive Remuneration Standards at Controlled Corporations

In this paper we analyze the relationship between conformity to executive remuneration
standards, corporate ownership, and the level and structure of CEO compensation for
large European listed companies in the years 2007 and 2010. We show that controlled
corporations, either family or State owned, conform to executive remuneration standards
less than widely held firms. We also show that weaker compliance is associated with
lower CEO pay and more ?conservative? incentive structures. We interpret this ?conformity
gap? from the perspective of individual firms and from a societal perspective, with the
aim to contribute to frame the policy questions concerning executive pay at controlled
corporations. Different policy implications depend on whether the conformity gap reflects
a lower need for managerial incentives, given the monitoring by controlling shareholders,
or the latter?s willingness to extract private benefits of control. We argue in this paper that
the former hypothesis seems to prevail, so that regulators should abstain from increasing
the level of enforcement of executive remuneration standards.