Pay for Short-Term Performance: Executive Compensation in Speculative Markets
Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Princeton University - Department of Economics; National Bureau of Economic Research (NBER)
Jose A. Scheinkman
Columbia University; Princeton University - Department of Economics; National Bureau of Economic Research (NBER)
ECGI - Finance Working Paper No. 79/2005
We argue that the root cause behind the recent corporate scandals associated with CEO pay is the technology bubble of the latter half of the 1990s. Far from rejecting the optimal incentive contracting theory of executive compensation, the recent evidence on executive pay can be reconciled with classical agency theory once one expands the framework to allow for speculative stock markets.
Number of Pages in PDF File: 52
Keywords: executive compensation, shareholders conflict
JEL Classification: G3working papers series
Date posted: March 25, 2005
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