Executive compensation & share options in UK quoted companies
The topic of executive compensation has recently emerged as a legitimate field for academic study. The rapid growth in publications has almost been matched by the well-publicised growth in CEO remuneration. From the time of the first utility privatisation in the UK, right up to current day, the topic of board room pay has rarely been out of the news headlines or the academic journals. This thesis makes several new contributions to the executive compensation literature, primarily by providing an in depth analysis of the executive option holdings of directors in the UK. Data on this aspect of executive compensation has until recently been unavailable and as such this thesis represents the first work in the UK to fully incorporate this element of remuneration for a large sample of companies. Executive options have become an increasingly significant component in executive compensation, yet their valuation and the incentive effects they create are relatively poorly understood. This thesis attempts to undo these shortcomings by providing a thorough analysis of the determinants and consequences of the level of option information disclosure. Furthermore, it develops the rational for granting executive options and describes the creation and distribution of the pay for performance sensitivities created by holdings of executive options. Finally, it deals with valuation issues that are particular to executive options.