scholarly journals Explaining Executive Compensation: Managerial Power versus the Perceived Cost of Stock Options

2002 ◽  
Vol 69 (3) ◽  
pp. 847 ◽  
Author(s):  
Kevin J. Murphy
Keyword(s):  
Executive Compensation ◽  
Stock Options ◽  
Managerial Power

DISCUSSION OF: Examining Shareholder Value Creation over CEO Tenure: A New Approach to Testing Effectiveness of Executive Compensation

2011 ◽  
Vol 23 (1) ◽  
pp. 29-36 ◽  
Author(s):  
Dan Weiss
Keyword(s):  
Executive Compensation ◽  
Performance Studies ◽  
Value Creation ◽  
Stock Options ◽  
Pay For Performance ◽  
Executive Pay ◽  
New Approach ◽  
Ceo Tenure ◽  
Executive Incentives ◽  
Managerial Power

ABSTRACT The executive compensation literature has explored the executive pay-for-performance relation in various contexts and reported mixed findings. As a result, the question of whether executive incentives, and particularly stock options, are effective continues to pose a puzzle to researchers. Gong (2011) uses a long window to examine effectiveness of executive compensation. This note discusses several broad aspects of pay-for-performance studies and their potential manifestation in this line of research and in Gong's study. Specifically, I elaborate on measurement issues and on each of the following aspects: (1) the underlying paradigm: arm's-length contracting versus managerial power; (2) the distinction between the pay-for-performance relationship and CEO overpay; (3) market efficiency; and (4) the settling-up problem.

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.

U.K. Executive Compensation Practices: New Economy versus Old Economy

2004 ◽  
Vol 16 (1) ◽  
pp. 57-92 ◽  
Author(s):  
Konstantinos Stathopoulos ◽  
Susanne Espenlaub ◽  
Martin Walker
Keyword(s):  
Executive Compensation ◽  
Stock Options ◽  
New Economy ◽  
Financial Policy ◽  
Executive Stock Options ◽  
Compensation Package ◽  
Size Growth ◽  
Old Economy ◽  
Almost All

This paper examines the executive compensation practices of listed U.K. retailing companies. We compare “New Economy” retailers (e-commerce/dot-coms) to more traditional retailers operating in the “Old Economy.” We also discriminate between recently floated retailers and their more seasoned counterparts. Using a sample of remuneration contracts for 549 directors in 72 listed U.K. companies in the New and Old Economies, we investigate the structure and level of executive (and nonexecutive) compensation defined as the sum of salary, annual bonus, and the values of executive stock options and long-term incentive plans (LTIPs). We investigate the extent to which the contract features are determined by firm characteristics, economic sector, and governance/ownership factors. In contrast to the U.S., where almost all executive stock options are issued at the money, there is a greater variety of practice in the U.K. with some options being granted substantially in the money. We therefore pay special attention to this U.K. institutional feature by producing a model designed to explain the crosssectional variation in the moneyness of stock options at the date of issue. We also examine the determinants of a number of other contract features. These are: the time to maturity of the executive stock options, the leverage of the compensation package, the ratio of long-term pay relative to short-term pay, and pay performance sensitivity. We find that differences in compensation arrangements can be explained to a significant extent by differences in firm size, growth/growth opportunities, firm financial policy, ownership characteristics, and governance arrangements. We also find some systematic differences between the compensation arrangements of CEOs and other executives.

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
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