Renneboog, Luc; Trojanowski, Grzegorz --- "Governance Codes, Managerial Remuneration and Disciplining in the UK: A History of Governance Reform Failure?" [2012] ELECD 602; in Thomas, S. Randall; Hill, G. Jennifer (eds), "Research Handbook on Executive Pay" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on Executive Pay

Editor(s): Thomas, S. Randall; Hill, G. Jennifer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849803960

Section: Chapter 4

Section Title: Governance Codes, Managerial Remuneration and Disciplining in the UK: A History of Governance Reform Failure?

Author(s): Renneboog, Luc; Trojanowski, Grzegorz

Number of pages: 28

Extract:

4 Governance codes, managerial remuneration and
disciplining in the UK: a history of governance
reform failure?
Luc Renneboog and Grzegorz Trojanowski


1 INTRODUCTION

Over the 1990s, the UK corporate governance regime experienced a series of sweeping
governance reforms initiated by the Code of Best Practice (so-called Cadbury report) in
1992 (and incorporated in the listing rules of the London Stock Exchange in July 1993)
and then followed by the Greenbury report in 1995, the Hampel report in 1998, and,
finally enshrined in the Combined Code of Corporate Governance in 1998. While some
evidence exists of the effects of the earlier reforms, in particular of the Cadbury report
(see e.g. Dahya et al., 2002, and Girma et al., 2007 for the effects of the Code introduction
on CEO dismissal and executive compensation, respectively), this chapter provides a
comprehensive examination of managerial remuneration and disciplining in the UK in
both the pre-reform period (i.e. before 1993) and in the post-reform period (i.e. as of
1999). It allows us to assess the efficiency of the governance changes and relate to the
critics claiming that the recommendations of the British governance committees did not
have sufficient clout to curb the excesses in managerial compensation. Numerous calls for
further improvements of practice in the area and for stronger shareholder involvement in
the pay-setting process followed the dispute over the pay of GlaxoSmithKline's CEO
Jean-Paul Garnier in 2003 and the ensuing shareholder revolt against corporate `fat cats'.
...