scholarly journals Managerial Power and Rent Extraction in the Design of Executive Compensation

2002 ◽  
Vol 69 (3) ◽  
pp. 751 ◽  
Author(s):  
Lucian Arye Bebchuk ◽  
Jesse M. Fried ◽  
David I. Walker
Keyword(s):  
Executive Compensation ◽  
Rent Extraction ◽  
Managerial Power

CEO Compensation and Acquired and Acquiring Companies in Large Corporate Acquisitions

GIS Business ◽  
2016 ◽  
Vol 11 (5) ◽  
pp. 01-13
Author(s):  
Simon Yang
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Relative Sensitivity ◽  
Matched Sample ◽  
Executive Pay ◽  
Corporate Acquisitions ◽  
Acquiring Firms ◽  
Managerial Power ◽  
To Receive

This paper examines the relative sensitivity of CEO compensation of both acquiring and acquired firms in the top 30 U.S. largest corporate acquisitions in each year for the period of 2003 to 2012. We find that total compensation and bonus granted to executive compensation for acquired companies, not acquiring companies, are significantly related to the amount of acquisition deal even after the size and firm performance are controlled for. Both acquiring and acquired CEOs are found to make the significantly higher compensation than the matched sample firms in the same industry and calendar year. We also find that executives with higher managerial power, as measured by a lower salary-based compensation mix, prior to a corporate acquisition are more likely to receive a higher executive pay in the year of acquisition. The association between executive compensation and managerial power seems to be stronger for acquired firms than for acquiring firms in corporate acquisition. Overall, our findings suggest that corporate acquisition has higher impacts on executive compensation for acquired firm CEOs than for acquiring firm CEOs.

Optimal Executive Compensation versus Managerial Power: A Review of Lucian Bebchuk and Jesse Fried's Pay without Performance: The Unfulfilled Promise of Executive Compensation

2007 ◽  
Vol 45 (2) ◽  
pp. 419-428 ◽  
Author(s):  
Michael S Weisbach
Keyword(s):  
Executive Compensation ◽  
Effective Potential ◽  
Risk Taking ◽  
Corporate Performance ◽  
Policy Changes ◽  
Standard View ◽  
Compensation Systems ◽  
Managerial Power ◽  
Positive Perspective ◽  
Normative Perspective

This essay reviews Lucian A. Bebchuk and Jesse M. Fried's Pay without Performance: The Unfulfilled Promise of Executive Compensation. Bebchuk and Fried criticize the standard view of executive compensation, in which executives negotiate contracts with shareholders that provide incentives that motivate them to maximize the shareholders' welfare. In contrast, Bebchuk and Fried argue that executive compensation is more consistent with executives who control their own boards and who maximize their own compensation subject to an “outrage constraint.” They provide a host of evidence consistent with this alternative viewpoint. The book can be evaluated from both positive and normative perspectives. From a positive perspective, much of the evidence they present, especially about the camouflage and risk-taking aspects of executive compensation systems, is fairly persuasive. However, from a normative perspective, the book conveys the idea that policy changes can dramatically improve executive compensation systems and consequently overall corporate performance. It is unclear to me how effective potential reforms designed to achieve such changes are likely to be in practice.

scholarly journals Corporate governance issues surrounding executive compensation and executive severance

2021 ◽  
Author(s):  
Andrea W. Zanetti
Keyword(s):  
Executive Compensation ◽  
Board Independence ◽  
Substantial Influence ◽  
Publicly Traded ◽  
Business Corporation ◽  
Effective Governance ◽  
Corporation Law ◽  
Managerial Power ◽  
Legislative Framework

This paper seeks to explain why and how executive severances of publicly-traded Canadian and U.S. companies have reached the financial levels they have, generating public and shareholder outrage and causing governments on both sides of the border to introduce new legislation. The paper investigates the role of the CEO, boards and shareholders in the setting of executive compensation. As the origins ofthe three roles lie in business corporation law, the legislative framework of Canadian and U.S. companies is presented to permit the reader to understand the legal accountabilities and rights of each of the three parties. The paper identifies that executives may exercise substantial influence over boards, possibly impeding effective governance. The paper concludes that effective governance, including greater board independence and board competence in executive compensation matters will help to improve board functioning and minimize the effects of the agency problem, cronyism and managerial power.

Managerial Power in the Design of Executive Compensation: Evidence from Japan

2007 ◽  
pp. 3-26 ◽  
Author(s):  
Stephen P. Ferris ◽  
Kenneth A. Kim ◽  
Pattanaporn Kitsabunnarat ◽  
Takeshi Nishikawa
Keyword(s):  
Executive Compensation ◽  
Managerial Power

scholarly journals Effect of Agency Costs on Executive Compensation in South African Commercial Banks

2017 ◽  
Vol 9 (4) ◽  
pp. 25
Author(s):  
Odunayo Magret Olarewaju ◽  
Stephen Oseko Migiro ◽  
Mabutho Sibanda
Keyword(s):  
Executive Compensation ◽  
South African ◽  
Commercial Banks ◽  
Banking Sector ◽  
Agency Cost ◽  
Least Square ◽  
Direct Effects ◽  
The South ◽  
Optimal Contracting ◽  
Managerial Power

This study examines the roles of agency cost (monitoring and bonding cost) on compensation of managers with a view from the managerial-power approach to agency cost. We modelled managers’ compensation and agency cost of banks to emphasise the potential influence of agency cost on managers’ compensation. A Panel Generalised Least Square model was estimated on four largely-controlled commercial banks in South Africa over the period 2010-2015. The result shows that shareholders’ fund, management share option, monitoring and bonding cost were strongly significant in explaining the managers’ compensation in the banks. Therefore, in the South African banking sector, compensation of managers should be based on their managerial power and not only on the principle of optimal-contracting. It is recommended, among others, that monitoring and bonding costs in the South African banks should be re-emphasised and strictly committed to. This should be so because there are direct effects of these costs on managers’ compensation which might be the reason for the persistent agency problem in the banks.

scholarly journals Executive compensation, organizational culture and the glass ceiling

2014 ◽  
Vol 11 (2) ◽  
pp. 239-247
Author(s):  
Michaël Dewally ◽  
Susan Flaherty ◽  
Daniel Singer
Keyword(s):  
Organizational Culture ◽  
Executive Compensation ◽  
Glass Ceiling ◽  
Strong Impact ◽  
Female Executives ◽  
Equity Compensation ◽  
Compensation Systems ◽  
Managerial Power ◽  
The Impact ◽  
The Relationship

This study examines the impact of organizational culture on executive compensation systems. Organizational culture is found to have a strong impact on the relationship between CEO equity compensation and organizational effectiveness. Compensation patterns found in traditional organizations are interpreted to reflect a Managerial Power Theory of executive compensation. In contrast, in positive organizations, the exercise of managerial power appears to be constrained by the internal values of that organization and the need for the leader to maintain his or her authenticity. Female executives who have penetrated the glass ceiling in both traditional and positive organizations are found to contribute to a culture in which executive compensation reflects an Optimal Contract approach to principle-agent relationships for CEOs and shareholders.

Hiding high pay

2017 ◽  
Author(s):  
Graeme Guthrie
Keyword(s):  
Executive Compensation ◽  
Construction Industry ◽  
Executive Pay ◽  
Managerial Power ◽  
Housing Boom ◽  
Boom And Bust ◽  
Home Construction ◽  
Bargaining Positions

This chapter uses pay in the home construction industry during the recent housing boom and bust to illustrate the second of the two competing theories that economists use to understand executive compensation: the managerial power hypothesis. According to this theory, boards at some firms have such weak bargaining positions that the only constraint on executive pay is the prospect of shareholder outrage. The theory’s central prediction is that weak boards and strong CEOs combine to find ways to pay executives that reduce the threat of shareholder outrage. This chapter develops this prediction and demonstrates its ability to explain observed pay practices that have the effect of camouflaging high pay levels.

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