The influence of comparative pay, customer service measures and accounting profits upon CEO pay in the UK privatised water industry

Stuart Ogden and Robert Watson

Accounting and Business Research, 2007, vol. 37, issue 3, 199-215

Abstract: The paper investigates the influence of comparative CEO pay levels, customer service measures and accounting profits upon CEO pay in the UK privatised water industry over the period from 1992 to 2001. We argue that political and regulatory considerations can be expected to constrain CEO pay levels and to motivate remuneration committees to link CEO pay awards to simultaneous improvements in both profits and customer service improvements. The empirical results indicate that the most important drivers of CEO pay changes are sales growth and a partial adjustment to comparable UK CEO pay levels. Customer service improvements and accounting profits are also significantly related to CEO pay awards. However, consistent with regulatory incentives that mitigate the inherent financial conflicts between the two performance measures, the results suggest that the influence of customer service improvements upon CEO pay is largely indirect and stems from the impact it has upon the benchmark profit used for performance-related pay purposes.

Date: 2007
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:taf:acctbr:v:37:y:2007:i:3:p:199-215

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DOI: 10.1080/00014788.2007.9730072

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