Executive Compensation: Where are We Coming from? Where are We Going? A Comparative Lawyer’s View on Corporate Social Irresponsibility

Society for the Advancement of Socio-Economics Network Annual Conference, June 28-30, 2012

18 Pages Posted: 27 Jun 2012

See all articles by Ivan Tchotourian

Ivan Tchotourian

Université Laval - Faculty of law; University of Nantes - Faculty of Law and Political Science

Frédéric Grotino

University of Montreal - Centre de recherche en droit public

Date Written: June 27, 2012

Abstract

In recent months, the financial and economic crisis has reintroduced into public debate the legitimacy of managers’ compensation in public corporations. The reaction of the various international bodies (G20, Financial Stability Forum, European Commission, Organisation of European and Economic Development), national governments and private organizations revolve around the idea of a more prudent approach towards responsibility and risk management. In this field, a strong trend in the regulatory approach is clearly pro-shareholder. One of the most discussed solutions is currently to reinforce the power of shareholders in the corporate governance of corporations. Consequently, “shareholder’s democracy” is presented as the solution by experts and numerous of academics. This proposition has, without any doubt, positive aspects. But, our paper demonstrates that limiting the reflection to the shareholder’s democracy is inadequate and risky. The response of the juridical tools intervenes in the dogma of the agency theory. Do the model’s bases of the regulatory solutions is relevant? Early in the 20th century early, Berle and Means reported on a new characteristic of the modern corporations: the separation of property and control. Taking into account the divergent interests between executives and shareholders, the agency theory proposed to link remuneration and performance. Nevertheless, the current economic model ignores that a corporation, through its activity, creates repercussions on its environment (economic, social and ecological). How can a responsible approach be aspired to when the currently accepted economic model seems to reject any notion of the good of society? One of the crucial problems for lawyers is to identify now what legal initiatives or choice could be a “good” response to the problematic of managers’ compensation.

Keywords: Managers’ Compensation, Statement, Theory agency, Shareholder Maximization, Legal perspectives, Evolution, Critics

JEL Classification: K20, K22, G38

Suggested Citation

Tchotourian, Ivan and Grotino, Frédéric, Executive Compensation: Where are We Coming from? Where are We Going? A Comparative Lawyer’s View on Corporate Social Irresponsibility (June 27, 2012). Society for the Advancement of Socio-Economics Network Annual Conference, June 28-30, 2012, Available at SSRN: https://ssrn.com/abstract=2094721 or http://dx.doi.org/10.2139/ssrn.2094721

Ivan Tchotourian (Contact Author)

Université Laval - Faculty of law ( email )

Pavillon Charles-De Koninck, Local 1111
Quebec, Qc G1V 0A6
Canada
418 656 2131 (2684) (Phone)

HOME PAGE: http://www.fd.ulaval.ca/faculte/professeurs/ivan-tchotourian

University of Nantes - Faculty of Law and Political Science ( email )

Chemin de la Censive du Tertre-BP81307
Nantes, 44313
France

HOME PAGE: http://www.univ-nantes.fr/tchotourian-i

Frédéric Grotino

University of Montreal - Centre de recherche en droit public ( email )

Montreal, Quebec
Canada

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