Agency problem – incentive plan and its relation to firm’s performance

Bc. ANASTASIIA FISUNOVA

Master's thesis

Abstract:

The Diploma Thesis is focused on the incentive plan, as a tool to deal with an agency problem. Theoretical part of this Diploma Thesis is focused on relationship between executive compensation and firm performance. Firstly, it provides theoretical basis and scientific discussion on the concept of agency problem and relation between CEO and shareholder wealth. Theoretical part also covers the meaning of risk sharing in principal-agent problem. Special attention in literature review paid to components of CEO payment – cash-based and share-based – their distinguishing features, criteria for granting and reasons of application. For comparison analysis were taken two companies from the same field: Citigroup Inc. and Bank of America (which also belong to the “Big 4” USA banks). The first chapter of Practical part is focused on compensation policy of chosen firms, based on their proxy statements. This part especially put emphasize on methods of annual payment calculation for CEO of each bank. Second part provides with the difference in compensation structure of two companies and tendencies in its change through investigated period of time. The interdependence between type of executive compensation and firm’s performance is assessed using statistical tools and regression analysis. Results coming from calculations are interpreted based on economic theory. Conclusion represents the summary of results and also the list of suggestions for Citigroup Inc. and Bank of America.

Keywords

executive compensation, CEO payment, cash-based payment, share-based payment, incentive plan

Jazyk práce: English

Datum vytvoření / odevzdání či podání práce: 29. 11. 2020

Obhajoba závěrečné práce

• Vedúci: Ing. Pavel Srbek, Ph.D.

Czech University of Life Sciences Prague

Faculty of Economics and Management

Master programme / odbor:
Economics and Management / Economics and Management