Abstract

http://ssrn.com/abstract=761970
 
 

Citations (59)



 
 

Footnotes (42)



 


 



Pay Without Performance: Overview of the Issues


Lucian A. Bebchuk


Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)

Jesse M. Fried


Harvard Law School; European Corporate Governance Institute (ECGI)


Journal of Corporation Law, Vol. 30, No. 4, pp. 647-673, 2005
Journal of Applied Corporate Finance, Vol. 17, No. 4, pp. 8-22, 2005
Academy of Management Perspectives, pp. 5-24, February 2006
Harvard Law and Economics Discussion Paper No. 528

Abstract:     
In a recent book, Pay without Performance: The Unfulfilled Promise of executive Compensation, we critique existing executive pay arrangements and the corporate governance processes producing them, and put forward proposals for improving both executive pay and corporate governance. This paper provides an overview of the main elements of our critique and proposals. We show that, under current legal arrangements, boards cannot be expected to contract at arm's length with the executives whose pay they set. We discuss how managers' influence can explain many features of the executive compensation landscape, including ones that researchers subscribing to the arm's length contracting view have long viewed as puzzling. We also explain how managerial influence can lead to inefficient arrangements that generate weak or even perverse incentives, as well as to arrangements that make the amount and performance-insensitivity of pay less transparent. Finally, we outline our proposals for improving the transparency of executive pay, the connection between pay and performance, and the accountability of corporate boards.

Number of Pages in PDF File: 16

Keywords: Keywords: Corporate governance, managers, shareholders, boards, directors, executive compensation, stock options, principal-agent problem, agency costs, rent extraction, disclosure, stealth compensation, compensation consultants, camouflage.

JEL Classification: D23, G32, G34, G38, J33, J44, K22, M14

Accepted Paper Series





Download This Paper

Date posted: July 19, 2005 ; Last revised: April 28, 2009

Suggested Citation

Bebchuk, Lucian A. and Fried, Jesse M., Pay Without Performance: Overview of the Issues. Journal of Corporation Law, Vol. 30, No. 4, pp. 647-673, 2005; Journal of Applied Corporate Finance, Vol. 17, No. 4, pp. 8-22, 2005; Academy of Management Perspectives, pp. 5-24, February 2006; Harvard Law and Economics Discussion Paper No. 528. Available at SSRN: http://ssrn.com/abstract=761970

Contact Information

Lucian A. Bebchuk (Contact Author)
Harvard Law School ( email )
Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)
HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)
Jesse M. Fried
Harvard Law School ( email )
1575 Massachusetts
Griswold Hall 506
Cambridge, MA 02138
United States
617-384-8158 (Phone)
HOME PAGE: http://www.law.harvard.edu/faculty/directory/10289/Fried
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Feedback to SSRN


Paper statistics
Abstract Views: 23,378
Downloads: 7,334
Download Rank: 353
Citations:  59
Footnotes:  42

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.344 seconds