Executive Compensation As An Agency Problem
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Executive Compensation As An Agency Problem
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Author : Lucian A. Bebchuk
language : en
Publisher:
Release Date : 2003
Executive Compensation As An Agency Problem written by Lucian A. Bebchuk and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Agency (Law) categories.
This paper provides an overview of the main theoretical elements and empirical underpinnings of a managerial power' approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between managers and shareholders but also as part of the agency problem itself. Boards of publicly traded companies with dispersed ownership, we argue, cannot be expected to bargain at arm's length with managers. As a result, managers wield substantial influence over their own pay arrangements, and they have an interest in reducing the saliency of the amount of their pay and the extent to which that pay is de-coupled from managers' performance. We show that the managerial power approach can explain many features of the executive compensation landscape, including ones that many researchers have long viewed as puzzling. Among other things, we discuss option plan design, stealth compensation, executive loans, payments to departing executives, retirement benefits, the use of compensation consultants, and the observed relationship between CEO power and pay. We also explain how managerial influence might lead to substantially inefficient arrangements that produce weak or even perverse incentives.
Executive Compensation As An Agency Problem
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Author : Lucian A. Bebchuk
language : en
Publisher:
Release Date : 2009
Executive Compensation As An Agency Problem written by Lucian A. Bebchuk and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
This paper provides an overview of the main theoretical elements and empirical underpinnings of a managerial power approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between managers and shareholders but also as part of the agency problem itself. Boards of publicly traded companies with dispersed ownership, we argue, cannot be expected to bargain at arm's length with managers. As a result, managers wield substantial influence over their own pay arrangements, and they have an interest in reducing the saliency of the amount of their pay and the extent to which that pay is de-coupled from managers' performance. We show that the managerial power approach can explain many features of the executive compensation landscape, including ones that many researchers have long viewed as puzzling. Among other things, we discuss option plan design, stealth compensation, executive loans, payments to departing executives, retirement benefits, the use of compensation consultants, and the observed relationship between CEO power and pay. We also explain how managerial influence might lead to substantially inefficient arrangements that produce weak or even perverse incentives.
Agency Theory And Executive Pay
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Author : Alexander Pepper
language : en
Publisher: Springer
Release Date : 2018-11-19
Agency Theory And Executive Pay written by Alexander Pepper and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-11-19 with Business & Economics categories.
This new book examines the relationship between agency theory and executive pay. It argues that while Jensen and Meckling (1976) were right in their analysis of the agency problem in public corporations they were wrong about the proposed solutions. Drawing on ideas from economics, psychology, sociology and the philosophy of science, the author explains how standard agency theory has contributed to the problem of executive pay rather than solved it. The book explores why companies should be regarded as real entities not legal fictions, how executive pay in public corporations can be conceptualised as a collective action problem and how behavioral science can help in the design of optimal incentive arrangements. An insightful and revolutionary read for those researching corporate governance, HRM and organisation theory, this useful book offers potential solutions to some of the problems with executive pay and the standard model of agency.
An Introduction To Executive Compensation
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Author : Steven Balsam
language : en
Publisher: Academic Press
Release Date : 2002
An Introduction To Executive Compensation written by Steven Balsam and has been published by Academic Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Business & Economics categories.
General readers have no idea why people should care about what executives are paid and why they are paid the way they are. That's the reason that The Wall Street Journal, Fortune, Forbes, and other popular and practitioner publications have regular coverage on them. This book not only proposes a reason - executives need incentives in order to maximize firm value (economists call this agency theory) - it also describes the nature and design of executive compensation practices. Those incentives can take the form of benefits (salary, stock options), or prerquisites (reflecting the status of the executive within the organizational culture.
Pay Equity In Ceo Compensation And Agency Problems
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Author : Jeongil Seo
language : en
Publisher:
Release Date : 2007
Pay Equity In Ceo Compensation And Agency Problems written by Jeongil Seo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
Agency Theory And Executive Compensation
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Author : Ray W Atchinson (II.)
language : en
Publisher:
Release Date : 2007
Agency Theory And Executive Compensation written by Ray W Atchinson (II.) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Compensation management categories.
Solutions To The Principal Agent Problem In The Firm
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Author : Catherine V. Brown
language : en
Publisher:
Release Date : 2001
Solutions To The Principal Agent Problem In The Firm written by Catherine V. Brown and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Compensation management categories.
Does increasing or restructuring executive compensation improve firm performance? Is there an optimal composition for the firm's supervisory board of directors? How effective are management incentives and regulation of management in alleviating firm agency problems? While previous work examines the relationships of executive compensation and board composition to firm performance in isolation, I explore the effects of the agency alleviating mechanisms in a simultaneous equations framework. I find evidence that the variables are jointly determined. If these findings indicate the approximate nature of the system, then results estimating these relationships in isolation are potentially spurious, and corporate governance recommendations based upon them may be ineffectual.
Mergers And Acquisitions And Executive Compensation
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Author : Virginia Bodolica
language : en
Publisher: Routledge
Release Date : 2015-06-26
Mergers And Acquisitions And Executive Compensation written by Virginia Bodolica and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-06-26 with Business & Economics categories.
Over the past decades, the total value of executive compensation packages has been rising dramatically, contributing to a wider pay gap between the chief executive officer and the average worker. In the midst of the financial turmoil that brought about a massive wave of corporate failures, the lavish executive compensation package has come under an intense spotlight. Public pressure has mounted to revise the levels and the structure of executive pay in a way that will tie more closely the executive wealth to that of shareholders. Merger and acquisition (M&A) activities represent an opportune setting for gauging whether shareholder value creation or managerial opportunism guides executive compensation. M&As constitute major examples of high-profile events prompted by managers who typically conceive them as a means for achieving higher levels of pay, even though they are frequently associated with disappointing returns to acquiring shareholders. Mergers and Acquisitions and Executive Compensation reviews the existing empirical evidence and provides an integrative framework for the growing body of literature that is situated at the intersection of two highly debated topics: M&A activities and executive compensation. The proposed framework structures the literature along two dimensions, such as M&A phases and firm’s role in a M&A deal, allowing readers to identify three main streams of research and five different conceptualizations of causal relationships between M&A transactions and executive compensation. The book makes a comprehensive review of empirical studies conducted to date, aiming to shed more light on the current and emerging knowledge in this field of investigation, discuss the inconsistencies encountered within each stream of research, and suggest promising directions for further exploration. This book will appeal to researchers and students alike in the fields of organizational behavior and governance as well as accounting and accountability.
Pay Without Performance
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Author : Lucian A. Bebchuk
language : en
Publisher: Harvard University Press
Release Date : 2004
Pay Without Performance written by Lucian A. Bebchuk and has been published by Harvard University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Business & Economics categories.
The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Why The Case Of Enron Falls Into The Principal Agent Framework
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Author : Vicki Preibisch
language : en
Publisher: GRIN Verlag
Release Date : 2007-02-04
Why The Case Of Enron Falls Into The Principal Agent Framework written by Vicki Preibisch and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-02-04 with Business & Economics categories.
Seminar paper from the year 2006 in the subject Economics - Job market economics, grade: 2,3, University of Kassel, language: English, abstract: It is claimed that lucrative executive compensation packages have led to irresponsible risk taking and a decline in shareholder value. This research paper is an economic approach to analyse the relationship between principals and agents, whereby the focus lies on executive remuneration incentives. The paper uses the example of Enron’s corporate failure to build a case for the principal-agent framework and analyses executive payment schemes. Aspects on the origins and possible solutions for the principal-agent relationship are looked into. The paper concludes that Enron’s compensation scheme has led to its failure.