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Weekly UpdatesA second limitation of this study is that change in CEO was not considered. It is probable that for at least some of the adopter firms, CEOs changed over the seven year measurement period. As CEOs change, it is likely that compensation packages are altered as well. However, many decisions made by executives have effects beyond the executives' tenure. In addition, when a new CEO enters the firm, the new compensation package is probably established with at least the same level of expectations as the package of the prior CEO. If this is true, changes in CEO over the measurement period analyzed for adopters should not affect the results and may even improve them. However, this is only supposition and without further testing of this notion, it is not possible to know if results of the current study are inadvertently affected by changes in CEOs.
An interesting extension of this study would be to analyze market returns over the seven-year period analyzed for each adopter firm, adjusting for overall market improvements and industry changes. One could compare the adjusted market performance to the firm performance evaluated in this study to see if the two behaved in a similar manner.
Recent studies on the effects of board composition on corporate governance, as well as studies analyzing the effects of institutional ownership on corporate governance, could be incorporated into this study as well. For the various adopting industries, it would be interesting to establish both the ownership structure as well as the makeup of the board of directors to see if there are any consistencies between the results for firm performance and these two variables.
Lastly, employing a much larger group of performance measures and working in only one industry or a smaller set of industries may provide a more accurate picture of the effects of the performance and tenure components of compensation packages. Examining an expanded set of performance measures, both quantitative and qualitative, would provide a clearer picture of the relationship between pay and performance within specific industries.
(1.) Adopter firms could be any size firm and therefore results could be impacted by very large companies or those with variables that are significantly different from all other firms. The data were analyzed for outliers and these were removed from the analysis to alleviate the problem of results being driven by companies with particularly large measures on any one of the variables.
(2.) The particular nine groups were chosen because they represent the largest portion of the available sample of adopter companies and allow for the largest sample size within each industry. For other industry grouping there were simply not a large enough sample of adopters to categorize into that particular grouping.
(3.) Though adopter companies appear to have larger mean sales than non-adopters for several of the industries, analyzing the results based on size, as measured by sales, does not significantly alter the results.
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