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Board pay and the separation of ownership from control in UK SMEs.

Watson, R. and Wilson, N. (2005) 'Board pay and the separation of ownership from control in UK SMEs.', Small business economics., 24 (5). pp. 465-476.


This paper examines Board pay for a sample of 571 U.K. SMEs from 1991 to 1995. Approximately half of the sample were closely-held (i.e., owner-managed) firms which allowed empirical testing of models of the relationship between Board pay and ownership from control characteristics. Consistent with their need to align shareholder and manager incentives, the results indicate that the change in nonclosely-held SME Board pay is significantly related to both external market pay comparisons and “benchmark” profits. This contrasts with the empirical results for the closely-held firms where Board pay awards are typically highly sensitive to current total profits but wholly unrelated to external market pay levels.

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Record Created:21 Mar 2007
Last Modified:01 Feb 2010 15:35

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