The relationship of corporate governance and pay-for-performance, through the example of Tesla Inc.

Absztrakt (kivonat)

1.1. The aim and structure of my thesis The aim of the thesis was to introduce the most important and relevant theoretical background of the Corporate Governance and CEO compensation and analyze the relationship of the company performance and CEO compensation at Tesla and in the industries where Tesla operates. At the beginning of the thesis I defined the research question which was the basis of both the primary and the secondary research and my aim was to answer whether “Is there a relationship between the variable compensation of the leader and the financial performance of the company at Tesla and in the industries where Tesla operates?”. With the secondary research my goal was to give an overview about the investigated topic. In order to get to know the theoretical background, the first chapter investigates the relevant expressions and theories. This chapter is divided into five parts: the first sub-chapter introduces the definition and the purpose of Corporate Governance, the Internal Corporate Governance and the External Corporate Governance. The next sub-chapter present the relevant theories about Corporate Governance: The Agency Theory, the Stewardship Theory and the Resource Dependence Theory. In order to understand the operation of the Corporate Governance the third sub-chapter introduces the roles and responsibilities of the board of directors, the Chief Executive Officer and the senior management, and the stakeholders. The next sub-chapter presents the theoretical background of the CEO compensation, and its effects on the performance of the company. The last sub-chapter within literature background Tesla Inc. is presented. After a short company review I analyzed the presented theories on the example of Tesla. In addition, the role and significance of Elon Musk, the CEO and the co-founder of Tesla is presented as well. I decided to choose this topic due to many reasons. From one side, the topic of Corporate Governance is important, actual and complex, and from the other side, I am interested in both of the Corporate Governance and the visionary leaders, also I follow the activities of some technology and automotive companies. 1.2. Methodology: The goal of my research is to analyze the relationship of the top management variable compensation and the company’s performance. The research question investigates whether there is a relationship between the variable compensation of the leader and the financial performance of the company at Tesla and in the industries where Tesla operates. Based on my preliminary research, my hypothesis supposes a positive relationship as it says that the variable compensation of the leader effects the financial performance of the company positively. I am going to investigate the research question with a quantitative research strategy. I decided to choose this type of research strategy to analyze my research question because it is in line with previous researches in this topic proceeded by Attaway (2000). My other reason to choose a quantitative research strategy was that I would like to be able to make general consequences based on the results of the calculations. However, the planned quantitative research strategy will provide an understanding about the relationship between the manager compensation and the company performance but it is not able to provide deeper explanation about the possible deviations and it is not able to identify any factors within pay for performance which might cause any deviations concerning the investigated topic. In addition, the application of a quantitative research strategy helps me to stay objective during data analysis, therefore it is the most appropriate research method for my research. 1.1.1. Conclusion: The hypothesis I defined at the beginning of the research is the following: The variable compensation of the leader effects the financial performance of the company. The hypothesis was examined with a regression analysis in the primary research. Based on the results of the regression analysis I rejected the hypothesis as the results confirmed a very weak relationship between company performance and the compensation based on performance.