학회소식
[2016년 제 1차] Does disclosure strengthen the efficiency of execut
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2016-03-02
In Korea, with the amendment of the Financial Investment Services and Capital Markets Act (FISCMA) in 2013, disclosure of executive’ pay has been enhanced. The legislation requires listed firms to disclose pay information for registered directors who earn more than 500 million Korean won in compensation a year. We examined whether the enhanced disclosure has changed compensation levels and pay-performance sensitivity. We found that the enhanced disclosure fails to reduce executive’ compensation level. Real compensation levels have increased, but controlling performance, pay levels don’t experience significant changes. Moreover, the executive who had earned less than the optimal pay level in 2013 experienced a higher pay growth rate in 2014. It seems that firms that recognized their executive was paid less due to released pay information raised compensation at a higher rate. Though disclosure does not significantly affect pay levels, we found that pay-performance sensitivity has been enhanced, especially in firms with weak governance or non-Chaebol firms. A number of regulations targeting Chaebol firms had brought greater public scrutiny to Chaebol firms and resulted in a significant executive pay-performance link. Similarly, well-governed firms monitored by boards of directors and shareholders had already and efficiently linked pay to the firm’s performance.
