Download or read book Pay Without Performance written by Lucian A. Bebchuk and published by Harvard University Press. This book was released on 2004 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book The Dependence of CEO Pay Performance Sensitivity on the Size of the Firm written by Scott Schaefer and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I analyze the relationship between firm size and the extent to which executive compensation depends on the wealth of the firm's shareholders. I use a simple agency model to motivate an econometric model of this relationship. Estimating this model on Chief Executive Officer compensation data using non-linear least squares, I determine that pay-performance sensitivity (as defined by Jensen and Murphy, 1990) appears to be approximately inversely proportional to the square root of firm size (however measured). I also analyze the properties of pay-performance sensitivity for quot;teamsquot; of executives working for the same firm and show it to have similar properties to CEO pay-performance sensitivity.

Download or read book The Handbook of the Economics of Corporate Governance written by Benjamin Hermalin and published by Elsevier. This book was released on 2017-09-18 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of the Economics of Corporate Governance, Volume One, covers all issues important to economists. It is organized around fundamental principles, whereas multidisciplinary books on corporate governance often concentrate on specific topics. Specific topics include Relevant Theory and Methods, Organizational Economic Models as They Pertain to Governance, Managerial Career Concerns, Assessment & Monitoring, and Signal Jamming, The Institutions and Practice of Governance, The Law and Economics of Governance, Takeovers, Buyouts, and the Market for Control, Executive Compensation, Dominant Shareholders, and more. Providing excellent overviews and summaries of extant research, this book presents advanced students in graduate programs with details and perspectives that other books overlook. - Concentrates on underlying principles that change little, even as the empirical literature moves on - Helps readers see corporate governance systems as interrelated or even intertwined external (country-level) and internal (firm-level) forces - Reviews the methodological tools of the field (theory and empirical), the most relevant models, and the field's substantive findings, all of which help point the way forward

Download or read book Pay Performance Sensitivity Before and After SOX written by Hui Chen and published by . This book was released on 2014 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this paper is to investigate the impact on pay-performance sensitivity of the Sarbanes-Oxley Act. We compare managers' pay-performance sensitivity before and after 2001-2002, a period during which regulatory changes were initiated to increase scrutiny over managerial manipulation and improve financial reporting quality. Based on ExecuComp data from 1992 to 2005 (and excluding the years 2001 and 2002), our results show that pay-performance sensitivity using either market-based or accounting-based measures of performance increased significantly following these events. When we further decompose executive pay into its cash-based and equity-based components, we find evidence of an increase in the link between performance and executive compensation for five of six measures for each performance metric. The evidence presented here is consistent with an improvement in the perceived credibility of reported earnings and an increased reliance on earnings in compensation contracts, which in turn resulted in an increase in the link between executive compensation and shareholder wealth.

Download or read book CEO Pay and Firm Performance written by Paul L. Joskow and published by . This book was released on 1994 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the dynamic structure of the pay-for- performance relationship in CEO compensation and quantifies the effect of introducing a more complex model of firm financial performance on the estimated performance sensitivity of executive pay. The results suggest that current compensation responds to past performance outcomes, but that the effect decays considerably within two years. This contrasts sharply with models of infinitely persistent performance effects implicitly assumed in much of the empirical compensation literature. We find that both accounting and market performance measures influence compensation and that the salary and bonus component of pay as well as total compensation have become more sensitive to firm financial performance over the past two decades. There is no evidence that boards fail to penalize CEOs for poor financial performance or reward them disproportionately well for good performance. Finally, the data suggest that boards may discount extreme performance outcomes -both high and low - relative to performance that lies within some `normal' band in setting compensation.

Download or read book Advances in Economic Theory written by Truman Fassett Bewley and published by CUP Archive. This book was released on 1989-07-28 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: These articles should be helpful to anyone with training in economics.

Download or read book Executive Pay performance Sensitivity and Corporate Monitoring Mechanism written by 陳珮綺 and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Executive Pay performance Sensitivity and Its Consequences written by Trairong Swatdikun and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Executive compensation has been extensively studied in market orientation economy; consequently the conflict of interest between the Principal and the Agent is clearly defined in a widely-held firm. A concentration-owned firm that dominates Asian capital markets have not such a conflict between the shareholders and the managers, but groups of shareholders in conflict are a concern. Since only one group of owner dominates the decision, executive compensation is hardly believed to be well established. Using a unique Thai listed company's data between 2002 and 2008 as a sample, this study presents empirical evidence on Agency theory outside the Anglo-Saxon setting. Ordinary least square method, fixed effects, two-stages least squares, generalised method of moments are deployed to test the hypotheses. In addition to all executive receives base pay, it reveals that bonus is the most common incentive while fewer than 10% of listed companies provide stock option to their executive. The econometric results reveal positive pay-performance sensitivity in Thai listed companies. However, ownership structure does play a vital role in the sensitivity. In a widely-held firm, the positive influence of firm performance on executive compensation is found. The evidence supports that widely-held firms have well established their executive compensation package. In the foreign-owned firm, the positive sensitivity reveals that foreign ownership actively take part in the compensation policy to serve the firm interests. Furthermore; Managerial power suggests that in the imbalance of power between groups of shareholder, there is no pay-performance sensitivity in neither family-owned nor corporate-owned firms. Further evidences indicate that operation cash flow and stock return are the consequence of executive bonus pay.

Download or read book CEO Pay and Firm Performance written by Paul L. Joskow and published by . This book was released on 2010 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores the dynamic structure of the pay-for- performance relationship in CEO compensation and quantifies the effect of introducing a more complex model of firm financial performance on the estimated performance sensitivity of executive pay. The results suggest that current compensation responds to past performance outcomes, but that the effect decays considerably within two years. This contrasts sharply with models of infinitely persistent performance effects implicitly assumed in much of the empirical compensation literature. We find that both accounting and market performance measures influence compensation and that the salary and bonus component of pay as well as total compensation have become more sensitive to firm financial performance over the past two decades. There is no evidence that boards fail to penalize CEOs for poor financial performance or reward them disproportionately well for good performance. Finally, the data suggest that boards may discount extreme performance outcomes -both high and low - relative to performance that lies within some `normal' band in setting compensation.

Download or read book Executive Compensation Regulation and the Dynamics of the Pay performance Sensitivity written by Ralf Sabiwalsky and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A substantial number of empirical studies on the linear relationship between executive compensation and firm performance for European firms suggest that the pay-performance sensitivity is not significantly positive. We argue that a nonlinear structure fits the data better, because compensation contracts provide for minimum performance benchmarks and an upper limit to the variable component of compensation. We test for such discontinuities in the pay performance relationship, and confirm their existence, using hand collected data from German Prime All Share firms' CEO bonus compensation. It turns out that there is a significant positive relationship between return on assets and CEO bonus for ROA between -3% and +20%. Performance sensitivity is then tested for changes over time between 2006 and 2009. Results reveal that during the first three years after the introduction of a statutory transparency rule in 2005 governing the disclosure of individual CEO compensation, significant changes to compensation contracts did not occur; but that in 2009 the pay-performance sensitivity exhibited a significant increase, which coincides with the passing of a law that requires supervisory boards to ensure that new CEO employment contracts provide for "reasonable" compensation. -- Executive Compensation ; Regulation ; Pay Performance Sensitivity

Download or read book Changing Incentives written by Heidi Suzanne Towne and published by . This book was released on 1998 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Compensation and Pay performance Sensitivity in a Continuous time Principal agent Model written by Nengjiu Ju and published by . This book was released on 2007 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Corporate Governance Matters written by David Larcker and published by FT Press. This book was released on 2011-04-14 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Governance Matters gives corporate board members, officers, directors, and other stakeholders the full spectrum of knowledge they need to implement and sustain superior governance. Authored by two leading experts, this comprehensive reference thoroughly addresses every component of governance. The authors carefully synthesize current academic and professional research, summarizing what is known, what is unknown, and where the evidence remains inconclusive. Along the way, they illuminate many key topics overlooked in previous books on the subject. Coverage includes: International corporate governance. Compensation, equity ownership, incentives, and the labor market for CEOs. Optimal board structure, tradeoffs, and consequences. Governance, organizational strategy, business models, and risk management. Succession planning. Financial reporting and external audit. The market for corporate control. Roles of institutional and activist shareholders. Governance ratings. The authors offer models and frameworks demonstrating how the components of governance fit together, with concrete examples illustrating key points. Throughout, their balanced approach is focused strictly on two goals: to “get the story straight,” and to provide useful tools for making better, more informed decisions.

Download or read book Pay for Performance in Health Care written by Jerry Cromwell and published by RTI Press. This book was released on 2011-02-28 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a balanced assessment of pay for performance (P4P), addressing both its promise and its shortcomings. P4P programs have become widespread in health care in just the past decade and have generated a great deal of enthusiasm in health policy circles and among legislators, despite limited evidence of their effectiveness. On a positive note, this movement has developed and tested many new types of health care payment systems and has stimulated much new thinking about how to improve quality of care and reduce the costs of health care. The current interest in P4P echoes earlier enthusiasms in health policy—such as those for capitation and managed care in the 1990s—that failed to live up to their early promise. The fate of P4P is not yet certain, but we can learn a number of lessons from experiences with P4P to date, and ways to improve the designs of P4P programs are becoming apparent. We anticipate that a “second generation” of P4P programs can now be developed that can have greater impact and be better integrated with other interventions to improve the quality of care and reduce costs.

Download or read book Changes in the Structure of CEO Compensation and the Firm s Pay Performance Sensitivity Following CEO Turnover written by David W. Blackwell and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We document significant improvements in earnings and stock returns after CEO turnover. Compared to old CEOs, new CEOs derive more of their compensation from salary and bonus and option grants, but less from stock holdings. The sensitivity of pay to performance increases significantly after a change in CEO. The salary and bonus of the new CEO is much more sensitive to performance than that of the old CEO; stock holdings and option grants are less sensitive. Changes in pay-performance sensitivity are greater after exogenous turnover than after exogenous turnover.

Download or read book Managerial Expertise Private Information and Pay Performance Sensitivity written by Sunil Dutta and published by . This book was released on 2007 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper characterizes optimal pay-performance sensitivities of compensation contracts for managers who have private information about their skills, and those skills affect their outside employment opportunities. The model presumes that the rate at which a manager's opportunity wage increases in his expertise depends on the nature of that expertise, i.e., whether it is general or firm-specific. The analysis demonstrates that when managerial expertise is largely firm-specific (general), the optimal pay-performance sensitivity is lower (higher) than its optimal value in a benchmark setting of symmetric information. Furthermore, when managerial skills are largely firm-specific (general), the optimal pay-performance sensitivity decreases (increases) as managerial skills become a more important determinant of firm performance. Unlike the standard agency theoretic prediction of a negative trade-off between risk and pay-performance sensitivity, the paper identifies plausible circumstances under which risk and incentives are positively associated. In addition to providing an explanation for why empirical tests of risk-incentive relationships have produced mixed results, the analysis generates insights that can be useful in guiding future empirical research.

Download or read book Performance Incentives Within Firms written by Raj Aggarwal and published by . This book was released on 1999 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical research on executive compensation has focused almost exclusively on the incentives provided to chief executive officers. However, firms are run by teams of managers, and a theory of the firm should also explain the distribution of incentives and responsibilities for other members of the top management team. An extension of the standard principal-agent model to allow for multiple signals of effort predicts that executives who have other, more precise signals of their effort than firm performance will have compensation that is less sensitive to the overall performance of the firm. We test this prediction in a comprehensive panel dataset of executives at large corporations by comparing executives with explicit divisional responsibilities to those with broad oversight authority over the firm and to CEOs. Controlling for executive fixed effects and the level of compensation, we find that CEOs have pay-performance incentives that are $5.85 per thousand dollar increase in shareholder wealth higher than the pay-performance incentives of executives with divisional responsibility. Executives with oversight authority have pay-performance incentives that are $1.26 per thousand higher than those of executives with divisional responsibility. The aggregate pay-performance sensitivity of the top management team is quite substantial, at $30.24 per thousand dollar increase in shareholder wealth for the median firm in our sample. Our work sheds light on the alignment of responsibility and incentives within firms and suggests that the principal-agent model provides an appropriate characterization of the internal organization of the firm.