Thesis title: Corporate Governance and Changes in Executive Compensation since 2014 , under the CRD IV Implementation in the EU and Italy, with Comparisons to the USA.
Recital 62 of CRD IV indicated that: “Remuneration policies which encourage excessive risk-taking
behavior can undermine sound and effective risk management of credit institutions and investment
firms.”
This research examines the changes in the corporate governance regime after the implementation of
the CRD IV remunerations on executive compensation in the financial industry in the EU with
comparison to the USA. This dissertation contributes through “filling in the gap” revealed in the
literature review regarding the internal agency solutions. First, it describes how studies on internal
agency solutions are interrelated and illustrated as integrated mechanisms. Second, it describes the
simultaneous interrelation between internal agency solutions and performance. While investigating the
effectiveness of the corporate governance arrangements in an equilibrium situation in which
governance and performance are at their optimum constraint level. The evidence of a significant
relationship between governance in models that do not account for the endogenous relation between
performance and governance is being driven by a spurious correlation. The importance of my
dissertation is enforcing the academic approach of viewing corporate governance arrangements as an
endogenous variable, simultaneously determined together with a performance by the firm's investment
opportunity set. This view is shift evidence in recent research and is in contrast to the early literature
review which viewed corporate governance as an exogenous determinant of performance with one
isolated variable.1I argue that the new legislation are in support of the results of the simultaneous
models further reveal significant interdependencies, whether complementarity or substitutability,
among executive compensation, corporate governance, and bank performance variables. For
example, banks with a large shareholder tend to have larger boards and more outside directors sitting
on their board, while the block owners who are already sitting on the board tend to have less outside
directors joining them in the board. Finally, banks with more debt capital tend to have less
managerial ownership held by directors. The data collection on executive compensation was
gathered from the annual reports and corporate governance reports on both
cash-based and equity-based components of executive compensation. These consist of cash
compensation, annual salary, short- and long-term bonuses and any other benefits, in addition to stock
options granted and exercised by executives and deferred compensation. All other data on ownership
structure, shareholder information, large shareholders, board composition, CEO duality and governance
system (unitary vs. two-tier), etc. were drawn manually from the annual reports. They include, for
example, details on the large shareholders and the size of their holdings; the percentage of cumulative
voting rights exercised by the largest shareholder with large equity holdings and the individuals who
own a large portion of the share capital (greater than 3%); and management shareholding (i.e. share
ownership by executives .
There are more to reveal with the new legislation and he umolentation of both reforms in the corporate
world and in the financial industry in the future .This research includes the following structure: Title, copy rights declaration, Abstract, Dedication,
Acknowledgements, Chapter 1- introduction, Chapter 2 Economic review, Chapter 3 ,4,5 are all three
parts of the literature review, Chapter 6 is the Methodology, Chapter 7 is the legal analyzes, solutions
and disciplines, Chapter 8 is the legal analysis and conclusion, Final part is the list of Bibliography.
Keywords: Banking, Corporate governance indicators, Directive CRD iv, discipline models and
debates of executive compensation, firm performance, Tournament theory.
1 Endogeneity