Pay without Performance

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September 2006



The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. "Pay without Performance" presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, "Pay without Performance" points the way to restoring corporate integrity and improving corporate performance.


Preface Introduction PART I. THE OFFICIAL VIEW AND ITS SHORTCOMINGS 1. The Official Story 2. Have Boards Been Bargaining at Arm's Length? 3. Shareholders' Limited Power to Intervene 4. The Limits of Market Forces PART II. POWER AND PAY 5. The Managerial Power Perspective 6. The Relationship between Power and Pay 7. Managerial Influence on the Way Out 8. Retirement Benefits 9. Executive Loans PART III. DECOUPLING PAY FROM PERFORMANCE 10. Non-Equity-Based Compensation 11. Windfalls in Conventional Options 12. Excuses for Conventional Options 13. More on Windfalls in Equity-Based Compensation 14. Freedom to Unwind Equity Incentives PART IV. GOING FORWARD 15. Improving Executive Compensation 16. Improving Corporate Governance Notes References Index


Lucian Bedchuk is William J. Friedman and Alicia Townsend Friedman Professor of Law, Economics, and Finance at Harvard Law School. Jesse Fried is Professor of Law at the Boalt Hall School of Law, University of California, Berkeley.


"For anyone looking for a guide to the debate over American top pay, this book will be indispensable. It is clear, well-argued, fully researched and deeply felt." - Michael Skapinker, Financial Times"
EAN: 9780674022287
ISBN: 0674022289
Untertitel: The Unfulfilled Promise of Executive Compensation. Sprache: Englisch.
Verlag: Harvard University Press
Erscheinungsdatum: September 2006
Seitenanzahl: 304 Seiten
Format: kartoniert
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