Shame Sanctions and Excessive CEO Pay

41 Pages Posted: 24 Feb 2008 Last revised: 11 Oct 2015

See all articles by Sandeep Gopalan

Sandeep Gopalan

Deakin University, Geelong, Australia - Deakin Law School

Abstract

The debate over excessive CEO compensation has roiled scholars, corporations, and the government for a considerable time. This article argues that a singular focus on regulation is mistaken, and contends that an approach based on nonlegal sanctions is the answer. Agencies like the New York Stock Exchange (NYSE) can resort to social sanctions with tools currently at their disposal at a relatively low cost to change the behavior of CEOs and corporate directors. Shame sanctions, as they are called, offer a nonlegal route to curbing exorbitant CEO compensation. Increased disclosure of executives' compensation agreements will trigger emotions like shame, guilt and embarrassment. This in turn has the potential to influence financial behavior and cause corporations to be more likely to heed the concerns of the public and shareholders vis-à-vis executive pay.

Keywords: CEO pay, compensation, corporate governance, shame, greed, disclosure, SEC, NYSE, say on pay

JEL Classification: K10, K23

Suggested Citation

Gopalan, Sandeep, Shame Sanctions and Excessive CEO Pay. Delaware Journal of Corporate Law (DJCL), Vol. 32, 2007, Available at SSRN: https://ssrn.com/abstract=1096642

Sandeep Gopalan (Contact Author)

Deakin University, Geelong, Australia - Deakin Law School ( email )

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Burwood, Victoria 3125, Victoria 3125
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