Reciprocal policy diffusion: the regulation of executive compensation in the UK and the US

Because of popular and political pressure, governments have been compelled to regulate ‘excessive’ executive compensation and search both a policy and political solution. In this paper, I seek to establish the mechanisms of policy learning, competition, and emulation by examining American and British regulatory policies of executive compensation that show evidence of reciprocal diffusion, i.e. from the US to the UK and vice versa. The evidence suggests that during the past two decades, the extent of reciprocal policy diffusion varied and was primarily driven by policy learning. Using published government reports, press releases, public hearings, newspaper articles, and interviews, I demonstrate that reciprocal learning occurred because one country's policymakers and practitioners explicitly discussed and/or referred to the practices in the other country when deciding to adopt a specific policy solution to the problem of excessive executive pay. I discuss the implications for the literature on diffusion and point out avenues for future research. Copyright © 2012 John Wiley & Sons, Ltd.