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Socio-Economic Review 2:33-63 (2004)
© 2004 Society for the Advancement of Socio-Economics

Remuneration committees and CEO pay in the UK privatized water industry

Stuart Ogden and Robert Watson1

Manchester School of Management, UMIST and 1 Durham Business School, University of Durham, Mill Hill Lane, Durham DH1 3LB, UK

Correspondence: Stuart Ogden, Manchester School of Management, UMIST, Manchester M60 1QD, UK. E-mail: Stuart.Ogden{at}umist.ac.uk

This paper examines the operation of remuneration committees in the privatized water industry through interviews with members of the remuneration committees and an empirical comparative analysis of water company and other UK CEO pay awards over the period 1991–1999. The claims made in interview that the committees work effectively, and that despite criticisms to the contrary, their CEOs are relatively underpaid, appear to be borne out by the empirical analysis. The empirical analysis also indicates that the water company remuneration committees have resisted upward drift in CEO pay levels, and that water company CEO pay awards are significantly related to firm performance.

Key Words: CEO pay • incentives • regulation • firm performance • JEL classification: D230 organizational behaviour; transaction costs; property rights, G380 corporate finance and governance: government policy and regulation, J330 compensation packages; payment methods (piece rates, time rates, bonuses, profit-sharing), K230 regulated industries and administrative law, L950 gas utilities; pipelines; water utilities, M120 personnel management (executive compensation), M520 personnel economics: compensation and compensation methods and their effects (stock options, fringe benefits, incentives, seniority issues)


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