Factors influencing executive compensation system:evidence from telecommunications industry (USA)

Abstract

The objective of the Master thesis is to define the relationship between a set of factors and executive compensation system to develop recommendations which will enable companies to imply better corporate governance practices in their management process. The study revealed that executive compensation is strongly and positively related to revenue and earnings per share of the company, and unrelated to return on net assets and market value added. This result enables companies to use executive compensation system as an effective mechanism to eliminate agency problem and, consequently, agency costs. In addition to this, the current research documented that before and after the crisis executive compensation was explained by revenue of a company, whereas during the crisis there was no significant correlation between compensation and factors. The incremental contribution of the study is the set of recommendations tailored for telecommunications companies.