It is widely acknowledged that the behaviour of top executives is influenced by the structure of their remuneration packages. Still, the focus of both academics and policy makers appears largely limited to the alignment of managerial incentives with the interests of shareholders. The unintended consequence of it is the resulting conflict of interests between debt and equity holders, in particular, excessive risk taking by the executives (which may harm the creditors). A combination of quantitative and qualitative techniques is applied to study UK public firms and investigate the role that the design of managerial incentive schemes could have in mitigating (or exacerbating) agency conflicts of debt financing. Specifically, the project analyses relations between companies' capital structure and the design of their executives' compensation packages. It also verifies if deferred compensation and pension entitlements of executives serve as a remedy for mitigating the conflict of interests between shareholders and debt holders, or if they represent excessive managerial remuneration. Finally, it examines the effects of the executive pay-mix design on managerial actions and on the investors' wealth. The project will contribute to academic literature and will provide evidence informing policy makers on transparency and governance guidelines regarding managerial compensation and incentive schemes.

Survey of Chairs of Remuneration Committees of UK listed firms