Heads I win, tails you lose? A career analysis of executive pay and corporate performance

The paper adopts a novel career perspective to examine theories of corporate control in the context of executive pay. Detailed career histories of boardroom executives in all FTSE 350 companies between 1996 and 2008 are utilised. The paper highlights the failure of existing arrangements to adjust pay outcomes where career performance is poor. The leading theoretical reasons for this disconnect, namely managerial power and neoinstitutionalism, are not consistent with the data. The paper identifies a settling-up process at work, whereby pay is adjusted in the light of both past pay and past performance. From a policy perspective, a case is made for adopting a cumulative or career-oriented approach to rewarding executive performance through the use of truly long-term incentives in the form of 'career shares'.