When Less is More: The Benefits of Limits on Executive Pay
نویسندگان
چکیده
We derive conditions under which limits on executive compensation can enhance efficiency and benefit shareholders (but not executives). Having its hands tied in the future allows a board of directors to credibly enter into relational contracts with executives that are more efficient than performance-contingent contracts. This has implications for the ideal composition of the board. The analysis also offers insights into the political economy of executive-compensation reform.
منابع مشابه
When Less is More : How Limits on Executive Pay can Result in Greater Managerial Effort and the Adoption of Better Strategies ∗
We derive conditions under which state-imposed limits on executive compensation can enhance efficiency and benefit shareholders (but not executives). Having their hands tied in the future allows a board of directors to credibly enter into relational contracts with executives that are more efficient than performance-based contracts. This in turn can have implications for firm strategy and the id...
متن کاملNonmonetary Benefits, Quality of Life, and Executive Compensation
We examine the effects of nonmonetary benefits on overall executive compensation from the perspective of the living environment at the firm headquarters. Companies in polluted, high crime rate, or otherwise unpleasant locations pay higher compensation to their chief executive officers (CEOs) than companies located in more livable locations. This premium in pay for quality of life is stronger wh...
متن کاملPublic Opinion and Executive Compensation
W investigate whether public opinion influences the level and structure of executive compensation. During 1992–2008, the negativity of press coverage of chief executive officer (CEO) pay varied significantly, with stock options being the most criticized pay component. We find that after more negative press coverage of CEO pay, firms reduce option grants and increase less contentious types of pa...
متن کاملPay Convexity, Earnings Manipulation, and Project Continuation
This paper studies the optimal design of long-term executive pay plans when boards of directors use accounting information for investment decision-making and executives can take costly actions to manipulate this information. The model predicts that a shift to more convex executive pay plans, such as equity plans that rely more on options and less on stock, is associated with higher levels of ma...
متن کاملNominal Hazard Zone in Medical Laser Centers
Control the laser beam hazards for class IIIB and IV laser is concluded: engineering and executive controls. In executive control, when laser beam enters to the free space, the controlled area must be identified to protect people and control the radiation exposure limits. Given the fact that the laser light of the laser is entering the environment, the identification of the area under control i...
متن کامل