Pay for Short-Term Performance: Executive Compensation in Speculative Markets

52 Pages Posted: 25 Mar 2005

See all articles by Patrick Bolton

Patrick Bolton

Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

José Scheinkman

Columbia University; Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

We argue that the root cause behind the recent corporate scandals associated with CEO pay is the technology bubble of the latter half of the 1990s. Far from rejecting the optimal incentive contracting theory of executive compensation, the recent evidence on executive pay can be reconciled with classical agency theory once one expands the framework to allow for speculative stock markets.

Keywords: executive compensation, shareholders conflict

JEL Classification: G3

Suggested Citation

Bolton, Patrick and Xiong, Wei and Scheinkman, José, Pay for Short-Term Performance: Executive Compensation in Speculative Markets (April 2005). Available at SSRN: https://ssrn.com/abstract=691142 or http://dx.doi.org/10.2139/ssrn.691142

Patrick Bolton (Contact Author)

Columbia Business School - Department of Economics ( email )

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HOME PAGE: http://www0.gsb.columbia.edu/faculty/pbolton/

Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI)

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Wei Xiong

Princeton University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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José Scheinkman

Columbia University ( email )

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Princeton University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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