Pay without Performance

By L. Bebchuk, J. Fried. 2006

188 citations recorded by the source corpus.

Executive Overview In a recent book, Pay without Performance: The Unfulfilled Promise of Executive Compensation, Bebchuk and Fried critique existing executive pay arrangements and the corporate governance processes that produce them. They also put forward proposals for improving both executive pay and corporate governance. This paper provides an overview of the main elements of their critique and proposals. The authors show that, under current legal arrangements, boards cannot be expected to contract at arm's length with the executives whose pay they set. They discuss how managers' influence can explain many features of the executive compensation landscape, including ones that researchers subscribing to the arm's-length contracting view have long considered as puzzling. The authors also explain how managerial influence can lead to inefficient arrangements that generate weak or even perverse incentives, as well as to arrangements that make the amount and performance-insensitivity of pay less transparent. F...

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/3ac4668155f6f4f952473798f932dbf86c5a2741

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Citations in the corpus

Who Monitors the Monitor? The Effect of Board Independence on Executive Compensation and Firm Value (2008, unknown): “There is major concern that CEOs wield an inordinate influence on the board’s constitution and functioning and that directors are excessively dependent on the management (e.g., Crystal, 1991; Bebchuk and Fried, 2004; and Morgensen, 2005).”
Executive Compensation, Corporate Governance and Corporate Performance: A Simultaneous Equation Approach (2015, unknown): “The executive compensation and performance literature has in the main developed from two major contrasting theoretical views 2 : optimal contracting and managerial power (Murphy, 1999; Bebchuk and Fried, 2003, 2004; Cheng and Firth, 2006; Van Essen et al., 2012).”
CEO Turnover in a Competitive Assignment Framework (2013, background): “Bebchuk and Fried (2004)). In this paper, we ask whether the implications of a competitive assignment model can also be used to understand the flip side of CEO pay, namely CEO turnover. As with (1)See also the early contribution by Lucas (1978), the competitive assignment model of the distribution o”
Common Ownership, Competition, and Top Management Incentives (2016, background): “B.2.4, using a shareholder “outrage constraint” (Bebchuk and Fried 2006), the contracting and the skimming view differ with respect to whether managers capture economic rents, but they both lead to high, performance-insensitive pay and greater managerial slack under weak governance.”
CEO Replacement under Private Information (2010, background): “Alternatively, it has been argued that boards are captured by the CEO, maximizing the CEO’s utility instead of firm profits (e.g., Bebchuk and Fried 2004).”
Executive Pay, Hidden Compensation and Managerial Entrenchment (2008, unknown): “3See the book “Pay Without Performance” (Bebchuk and Fried (2004)) for a comprehensive and well-documented argument for this perspective.”
The Price of a CEO's Rolodex (2012, methodology): “Electronic copy available at: http://ssrn.com/abstract=1364595 * We have benefited from discussions with Andres Almazan, Aydoğan Altı, Shane Corwin, Adolfo de Motta, Charlie Hadlock, Jay Hartzell, Byoung-Hyoun Hwang, Seoyoung Kim, Tim Loughran, Mitchell Petersen, Gordon Phillips, Anil Shivdasani,…”
From social control to financial economics: the linked ecologies of economics and business in twentieth century America (2009, background): “…school had the authority to redefine managerial action and the nature of the corporation, setting in motion a “ managerial revolution in reverse, ” whereby managers were transformed, both symbolically and materially, into major corporate owners (Hall and Leibman 1998; Bebchuk and Fried 2006).”
Board gender diversity and dividend policy in Australian listed firms: the effect of ownership concentration (2019, unknown): “The managerial power hypothesis suggests that specific structural and sociopsychological mechanisms that influence the board-level decision-making process give managers (especially the CEO) power over the board (Bebchuk & Fried, 2004).”