Controlling Executive Compensation – Directors' and Officers' Liability Insurance: A Proposed Solution to Inflated Pay

18 Pages Posted: 24 Apr 2010

Date Written: April 5, 2010

Abstract

Discourse surrounding executive compensation has been ripe, yet no regulatory mechanism has been successful in controlling the two main features of executive compensation: salary and severance. Lack of convergence between compensation received by executives and their performance in managing the corporation creates detrimental inefficiencies. Directors’ and Officers’ liability insurance (D&O Insurance), currently addresses “the financial risk of malfeasance”, by shifting liability to an insurance company. By insuring against the severance packages of executives, Directors’ and Officers’ liability insurance can effectively control executive compensation.

Keywords: D&O Insurance, Directors' and Officers' Liability Insurance, Executive Compensation, CEO Pay

Suggested Citation

Campbell, Sharie-Ann Jheanelle, Controlling Executive Compensation – Directors' and Officers' Liability Insurance: A Proposed Solution to Inflated Pay (April 5, 2010). Available at SSRN: https://ssrn.com/abstract=1595091 or http://dx.doi.org/10.2139/ssrn.1595091

Sharie-Ann Jheanelle Campbell (Contact Author)

affiliation not provided to SSRN ( email )

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