Executive Compensation: Who Decides?

57 Pages Posted: 24 Jan 2005  

Stephen M. Bainbridge

University of California, Los Angeles (UCLA) - School of Law

Abstract

Pay Without Performance: The Unfulfilled Promise of Executive Compensation by Harvard law professor Lucian Bebchuk and UC Berkeley law professor Jesse Fried is an important contribution to the literature on executive compensation. Bebchuk and Fried's positive account of executive compensation is entirely managerialist; i.e., they argue that top management of public corporations so thoroughly control the board of directors that the former are able to extract compensation packages from the latter far in excess of that which would obtain under arms'-length bargaining. In this review essay, I argue that Bebchuk and Fried overstate the extent to which management controls the compensation process. I also argue that they have not made a convincing case for the reforms to corporate governance they propose.

Keywords: corporations, corporate governance, board of directors, executive compensation

JEL Classification: K22

Suggested Citation

Bainbridge, Stephen M., Executive Compensation: Who Decides?. Texas Law Review, 2005. Available at SSRN: https://ssrn.com/abstract=653383

Stephen Mark Bainbridge (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
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HOME PAGE: http://www.professorbainbridge.com

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