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
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
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