Asli M. Colpan

Performance Sensitivity of Executive Pay: The Role of Foreign Investors and Affiliated Directors in Japan

Manuscript Type. Empirical. Research Question/Issue. This study investigates the effects of corporate governance factors on the firm performance and executive compensation linkage. Specifically, we examine how domestic corporate‐appointed directors, bank‐appointed directors and foreign ownership moderate the relationship between firm profitability, sales growth, and executive bonus pay in Japanese firms. Research Findings/Insights. Using a sample of the largest Japanese manufacturing companies from 1997 to 2007, we find that corporate‐appointed directors positively moderate the relationship between firm growth and bonus pay, while foreign shareholders exhibit a positive moderating effect on the relationship between firm profitability and bonus pay. Bank‐appointed directors are straddled between their profitability orientation and relational role: They link firm profitability and bonus pay, but also show positive influence on the firm growth and bonus pay relationship. Theoretical/Academic Implications. This study makes a contribution to research on ownership heterogeneity and executive compensation by empirically showing that different owners and directors affiliated with certain ownership groups have varied implications on the firm performance–executive pay relationship. It also makes a contribution to research on corporate governance change by providing insights on how different actors facilitate shifts in the linkage between performance and pay. Practitioner/Policy Implications. Our findings offer insights to stakeholders to pay attention to ownership structure and board composition in acknowledging the varied financial motivation of executives to pursue growth and/or profitability.

Business Groups, Entrepreneurship and the Growth of the Koç Group in Turkey

Abstract This article examines the emergence and development of what became the largest business group in Turkey, the Koç Group. This venture was an important actor in the emergence of modern business enterprise in the new state of the Republic of Turkey from the 1920s. After World War II it diversified rapidly, forming part of a cluster of business groups which dominated the Turkish economy alongside state-owned firms. This article examines how the founder of the Group, Vehbi Koç, formulated his business model, and analyses how his firm evolved into a diversified business group. Although the case supports prevailing explanations of business groups related to institutional voids, government policy and the importance of contact capabilities, this study builds on and extends the earlier suggestions that entrepreneurship needs incorporating as an explanatory factor. The article shows that Koç acts as both a Kirznerian and Schumpeterian entrepreneur to build his group, both in its formative stages and later in its subsequent growth into a diversified business group.

Changing Ownership and Governance Innovation

The corporate governance practices of large Japanese enterprises were a focus of controversy during and after the rapid rise of these enterprises to international prominence in the 1980s. The perception of Japanese governance mechanisms at that time stands out as the antipodal opposite of the current thrust for the ‘global’ standards. The popular view at the height of Japan’s economic power was that top executives in Japan, with no distracting interventions from pesky shareholders, exercised their discretion to target long-term efficiency-enhancing goals, to the profit of employees, shareholders, and other stakeholders. According to this view, the agency costs of managerial autonomy should be adequately compensated by the knowledge capital accumulated in and utilized by salaried management. In the US, on the other hand — according to the conventional view at the time — shareholders pressured salaried managers to maximize short-term returns at the expense of their firms’ economic health, thus ultimately harming the competitiveness of US industry in the 1980s.