Explaining Pay Without Performance
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Explaining Pay Without Performance
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Author : Iman Anabtawi
language : en
Publisher:
Release Date : 2008
Explaining Pay Without Performance written by Iman Anabtawi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
After only a brief hiatus in the wake of the stock market downturn of 2000, Chief Executive Officer (CEO) pay levels have resumed their upward trajectory. In response, many influential shareholders and academics are asking the question: Are the executive compensation arrangements we observe examples of optimal contracting between CEOs and the boards of directors of the firms they manage, according to which executives are rewarded for enhancing shareholder value? Or do such arrangements indicate a corporate governance failure, whereby CEOs exercise so much influence over boards that managers are effectively setting their own pay? The foregoing accounts - optimal contracting and managerial power, respectively - dominate current explanations of how executive pay is structured. In this Article, I demonstrate that neither explains adequately observed executive pay arrangements. Instead, I turn to the paradigm of tournament theory-in which CEO pay is a prize awarded to the winner of a competition to get to the top of the corporate ladder; to illuminate the structure of executive pay. Introducing tournament theory into the mix of how firms motivate their CEOs can explain features of CEO pay that are either inconsistent with, or deemed inefficient by, competing theories. Because one's view of how executive pay arrangements should be designed has significant implications for our assessment of actual executive pay practices, I argue that we should consider the role that tournaments can play in motivating executives before undertaking reforms in the executive pay arena. Optimal contracting theory, in which boards of directors are assumed to be designing pay-for-performance contracts to align the interests of managers with those of shareholders, remains the dominant lens through which executive pay arrangements are analyzed. Observed executive pay contracting fails, however, to conform to the optimal contracting model. Rather than linking compensation to performance, pay arrangements for executives do not reveal a statistically significant relationship between the two. This anomaly has puzzled scholars in the executive compensation area and generated a vigorous debate over pay without performance.
Pay Without Performance
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Author : Lucian A. Bebchuk
language : en
Publisher:
Release Date : 2009
Pay Without Performance 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.
In a recent book, Pay without Performance: The Unfulfilled Promise of executive Compensation, we critique existing executive pay arrangements and the corporate governance processes producing them, and put forward proposals for improving both executive pay and corporate governance. This paper provides an overview of the main elements of our critique and proposals. We show that, under current legal arrangements, boards cannot be expected to contract at arm's length with the executives whose pay they set. We discuss how managers' influence can explain many features of the executive compensation landscape, including ones that researchers subscribing to the arm's length contracting view have long viewed as puzzling. We also explain how managerial influence can lead to inefficient arrangements that generate weak or even perverse incentives, as well as to arrangements that make the amount and performance-insensitivity of pay less transparent. Finally, we outline our proposals for improving the transparency of executive pay, the connection between pay and performance, and the accountability of corporate boards.
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.
Executive Compensation In Contemporary Corporate Governance
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Author : James A. McConvill
language : en
Publisher:
Release Date : 2010
Executive Compensation In Contemporary Corporate Governance written by James A. McConvill and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
In late 2004, law professors Lucian Bebchuk and Jesse Fried released a controversial new work, Pay without Performance: The Unfulfilled Promise of Executive Compensation. In Pay without Performance, Bebchuk and Fried highlight that in recent times there has been a decoupling of pay and performance in the United States, and articulate a quot;managerial powerquot; thesis to explain this trend. In this article, the author outlines the case for why pay for performance is not an quot;unfulfilledquot; promise, but rather is no promise at all. The author argues that agency theory, and pay for performance which is based upon agency theory, derives from a narrow, and ultimately false understanding of human motivation and behaviour. Drawing on an extensive range of literature in psychology, management and workplace relations, behavioural law and economics, sociology, philosophy and law, the author explains why the view of agency theorists regarding the importance of remuneration is misguided.
Tournament Theory And Its Relevance To Executive Pay
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Author : David Jamin Schneider
language : en
Publisher: GRIN Verlag
Release Date : 2011-06-15
Tournament Theory And Its Relevance To Executive Pay written by David Jamin Schneider and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-06-15 with Business & Economics categories.
Essay from the year 2010 in the subject Business economics - Business Management, Corporate Governance, grade: 2,0, Murdoch University (Business School), course: Managing Remuneration, Benefits & Motivation, language: English, abstract: This assignment deals with the issue of tournament theory and will give an insight in its theoretical background and its relevance to executive pay. Moreover, the following pages will display the impacts of the tournament theory on organizations and its employees within a business context.
Explaining Executive Pay
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Author : Lukas Hengartner
language : en
Publisher: Springer Science & Business Media
Release Date : 2007-12-31
Explaining Executive Pay written by Lukas Hengartner and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-12-31 with Business & Economics categories.
Lukas Hengartner shows that both firm complexity and managerial power are associated with higher pay levels. This suggests that top managers are paid for the complexity of their job and that more powerful top managers receive pay in excess of the level that would be optimal for shareholders.
Pay Without Performance
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Author : Kenneth West
language : en
Publisher:
Release Date : 2008
Pay Without Performance written by Kenneth West and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
This paper is based on the author's comments at the Columbia University Symposium on Bebchuk and Fried's quot;Pay without Performance: The Unfulfilled Promise of Executive Compensation.quot; The paper discusses the book and the problems of executive compensation from an executive's perspective.
Die Deutsche Offensive Im Westen Im Urteil Der Feindlichen Und Neutralen Presse Kriegspresseamt Auslandstelle
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Author :
language : en
Publisher:
Release Date : 1918
Die Deutsche Offensive Im Westen Im Urteil Der Feindlichen Und Neutralen Presse Kriegspresseamt Auslandstelle written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1918 with categories.
Outrage Camouflage
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Author : Kym Sheehan
language : en
Publisher:
Release Date : 2009
Outrage Camouflage written by Kym Sheehan 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.
A review of Pay without performance: the unfulfilled promise of executive compensation by Lucian Bebchuk and Jesse Fried.This article examines the outrage constraint and the related issue of camouflage in practice to suggest that their are limits to the ability of outrage to constrain executive remuneration. Recommendations for reform suggested by Lucian Bebchuk and Jesse Fried are examined from an Australian legal perspective. The fact that many of their suggestions are already in place in this jurisdcition does not necessarily mean that we have resolved the problems with executive remuneration.
Executive Compensation
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Author : Jeffrey N. Gordon
language : en
Publisher:
Release Date : 2006
Executive Compensation written by Jeffrey N. Gordon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
High levels of executive compensation have triggered an intense debate over whether compensation results primarily from competitive pressures in the market for managerial services or from managerial overreaching. Profs. Lucian Bebchuk and Jesse Fried have advanced the debate with their recent book, Pay Without Performance: The Unfulfilled Promise of Executive Compensation, which forcefully argues that the current compensation levels are best explained by managerial rent-seeking, not by arm's length bargaining designed to create the optimum pay and performance nexus. This paper expresses three sorts of reservations with their analysis and advances its own proposals. First, maximizing shareholder value is not, as a positive or normative matter, a sufficient framework for understanding the controversy or devising a remedy. Second, many of the compensation practices identified by Bebchuk and Fried as veritable smoking guns of managerial power may have benign explanations. Third, even accepting that the present corporate governance apparatus needs improvement in the executive compensation area, the better remedy is not a wholesale expansion of shareholder power, but a tailored serious of measures designed to bolster the independence in fact of the compensation committee. Most important, the SEC should require proxy disclosure of a Compensation Discussion and Analysis statement (CDamp;A) signed by the members of the compensation committee (or by the responsible independent directors for firms without a compensation committee). Such a CDamp;A ought to collect and summarize all compensation elements for each senior executive, providing bottom line analysis. This process ownership, reputation-staking, and publicity will strengthen the committee's hand against managerial pressure and will elicit both shareholder and public responses that necessarily contribute to the compensation bargain. In addition to the CDamp;A, serious thought should be given to a shareholder approval vote on the CDamp;A, following the new UK practice.