Intra-Firm Monitoring of Executive Compensation

70 Pages Posted: 19 Oct 2015

See all articles by Robert J. Rhee

Robert J. Rhee

University of Florida - Levin College of Law

Date Written: 2015

Abstract

This Article argues that employees should serve as intra-firm monitors of executive performance and pay. Employees and shareholders, labor and capital, can monitor executive performance and pay at different levels. Diffuse, diversified, and short durational shareholders currently monitor through the market mechanism of public disclosures and share price. Employees can add an effective layer of monitoring by leveraging private information. Employees possess the corporation’s entire information content; the assessment derived there from would be relevant to the board’s assessment of executive performance and pay. Corporate employees are also a major constituent of the corporate system and our political society. Given that excessive pay has been linked to economic inequity, employee monitoring can also legitimate executive pay in the current social, economic, and political environment in which executive compensation and income disparities have touched public consciousness. The basic structure of such monitoring already exists in law, which is shareholder say-on-pay mandated by the Dodd-Frank Act. Structured properly and achieved fairly as to senior executives, a non-binding employee vote would politically legitimate executive compensation and income disparity at both the firm and political levels.

Suggested Citation

Rhee, Robert J., Intra-Firm Monitoring of Executive Compensation (2015). 69 Vanderbilt Law Review, 2016 (Forthcoming); University of Florida Levin College of Law Research Paper No. 15-21. Available at SSRN: https://ssrn.com/abstract=2676324

Robert J. Rhee (Contact Author)

University of Florida - Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

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