Jesse M. Fried
Harvard Law School; European Corporate Governance Institute (ECGI)
June 24, 2011
Vanderbilt Law Review, Vol. 61, pp. 453-474, 2008
UC Berkeley Public Law Research Paper No. 1091068
Despite recent reforms, public company executives can still use inside information to time their stock sales, secretly boosting their pay. They can also still inflate the stock price before selling. Such insider trading and price manipulation imposes large costs on shareholders. This paper suggests that executives' options be cashed out according to a pre-specified, gradual schedule. These hands-off options would substantially reduce the costs associated with current equity arrangements while imposing little burden on executives.
Number of Pages in PDF File: 1
Keywords: Executive compensation, stock options, insider trading, earnings manipulation
JEL Classification: G34, G38, J33, K22, M52
Date posted: February 7, 2008 ; Last revised: June 24, 2011
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