CEO share compensation, incentives, and business cycle: Some evidence from BHP Billiton

Doojav, Gan-Ochir and Losol, Bayarmaa (2015): CEO share compensation, incentives, and business cycle: Some evidence from BHP Billiton.

Abstract

The paper argues that the CEO compensation policy of a mining company should consider the business cycle when evaluating the CEO’s performance of long-term incentive plan (LTIP). As an example, the case study of BHP Billiton supports the argument that the business cycle significantly affects the CEO compensation, specifically to LTIP remuneration. Therefore, the CEO compensation policy of a mining company should consider the business cycle when evaluating the CEO’s performance of LTIP. There should be a qualitative judgment to adjust the impact of the business cycle and to ensure that vesting of share options is not simply obtained from a formula that may give unexpected or unintended remuneration outcomes.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate governance; CEO share compensation; incentives; business cycle
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages ; Payment Methods; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M51 - Firm Employment Decisions ; Promotions

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