Question 1
The High Pay Centre reported that the median FTSE100 chief executive officer took
home £2.69 million in 2020. This was the lowest median pay since 2009 and a
reduction of 17% from the median CEO pay in 2019 of £3.25 million.
Required
Drawing from academic theory, critically appraise the theories and factors that have
driven the growth in executive compensation in the banking and financial sector since
the 1990s. Does the reduction in compensation represent the end of rent extraction?
[total 50 marks]

Question 2
“Much research has focused on how executive compensation schemes can help
alleviate the agency problem in publicly traded companies. To understand adequately
the landscape of executive compensation, however, one must recognize that the
design of compensation arrangements is also partly a product of this same agency
problem”. (Bebchuk and Fried, 2003).
Required
Describe how executive compensation contracts should be constructed to mitigate
conflicts between principals and agents. In your discussion, explain how information
asymmetries can lead to adverse selection, moral hazard and hidden actions.
[total 50 marks]

Question 3.
There were seven female FTSE100 CEOs in 2020, the same number as in 2019.
Required
Identify the factors that influence gender pay differentials and constitute barriers to
females from progression to the highest hierarchical positions in an organization.
Critically evaluate whether the presence of (more) females in senior executive roles
improves corporate firm performance and/or risk taking.
[total 50 marks]

Question 4.
Crawford, Ezzell and Miles (1995) examine the association between banking
deregulation and the pay-performance sensitivity of bank CEO compensation packages.
Required
With specific reference to agency theory and managerial power, critically evaluate
how banks integrate the financial reward and business strategies using pay-forperformance mechanisms.
[total 50 marks]

Question 5.
Donald Trump described CEO pay as “a total and complete joke” and “disgraceful”.
Required
Critically evaluate the extent to which executive compensation might be a motivator
in tournament contests.
[total 50 marks]

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