Lucky CEOs and Lucky Directors

49 Pages Posted: 3 Dec 2010 Last revised: 26 Oct 2011

See all articles by Lucian A. Bebchuk

Lucian A. Bebchuk

Harvard Law School; National Bureau of Economic Research (NBER)

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah; European Corporate Governance Institute (ECGI)

Urs Peyer

INSEAD - Finance

Date Written: May 15, 2009


This paper integrates and further develops the analysis of two discussion papers we circulated earlier, “Lucky CEOs” and “Lucky Directors.”

Our study contributes to understanding the corporate governance determinants and implications of backdating practices during the decade of 1996-2005. Overall, our analysis provides support for the view that backdating practices reflect governance breakdowns and raise governance concerns.

Our analysis focuses on at-the-money “lucky” grants awarded at the lowest price of the grant month. In particular, we find that:

(i) Opportunistic timing has been correlated with factors associated with greater influence of the CEO on corporate decision-making, such as lack of a majority of independent directors, a long-serving CEO, or a lack of a block-holder with a “skin in the game” on the compensation committee; (ii) Grants to independent directors have also been opportunistically timed and that this timing was not merely a by-product of simultaneous awards to executives or of firms’ routinely timing all option grants; (iii) Lucky grants to independent directors have been associated with more CEO luck and CEO compensation; (iv) Rather than being a substitute for other forms of compensation, gains from opportunistic timing were awarded to CEOs with larger total compensation from other sources; and (v) Opportunistic timing was not driven by firm habit but rather, for any given firm, the use of such timing was itself timed to increase its profitability for recipients. (vi) The odds of a CEO’s grant being lucky were significantly higher, controlling for CEO and firm characteristics in our dataset, when a preceding grant to the CEO was lucky as well.

Because our analysis suggests that the existence of lucky CEO and director grants is a variable that can be useful to research studying firms’ governance and decision-making, we make available on the website of the Harvard Program on Corporate Governance a dataset of CEO and director luck indicators based on our work.

Lucky CEOs is available on SSRN at: Lucky Directors is available on SSRN at:

Keywords: Executive compensation, corporate governance, options, backdating, timing, spring-loading, inside information, CEO, independent directors

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

Suggested Citation

Bebchuk, Lucian A. and Grinstein, Yaniv and Peyer, Urs C., Lucky CEOs and Lucky Directors (May 15, 2009). Journal of Finance, Vol. 65, No. 6, pp. 2363-2401, 2010; Johnson School Research Paper Series No. 39-09; CELS 2009 4th Annual Conference on Empirical Legal Studies Paper . Available at SSRN:

Lucian A. Bebchuk (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)


National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150

European Corporate Governance Institute (ECGI)

B-1050 Brussels

Urs C. Peyer

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
+33 1 6072 4178 (Phone)
+33 1 6072 4045 (Fax)

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