509 Posts Found

Furor over banker’s pay has put the spotlight on executive compensation. What appears to be a disconnect between executive pay and a company’s results has inspired renewed demands that companies “pay for performance.” The critics are on to something—and it isn’t limited to the financial sector. There is something wrong with the way most companies approach executive compensation. Before companies can fix it, however, they … [ Read more ]

Content: Article | Authors: Frank Plaschke, Gerry Hansell, Lars-Uwe Luther, Mathias Schatt | Source: Boston Consulting Group (BCG) | Subject: Corporate Governance

Executive compensation packages that provide huge payouts for short-term stock-market gains have been blamed for playing a role in the risky behavior that triggered the continuing financial crisis. In a new research paper, a Wharton professor and several colleagues say they have come up with something better: A compensation structure based on long-term escrow accounts.

Content: Article | Author: Alex Edmans | Source: Knowledge@Wharton | Subject: Corporate Governance

There is one problem with all forms of variable pay—whether short term or long term, based on cash or on equity. There is always a fi nancial upside for executives (and sometimes that upside is quite high), but there is not an equivalent downside. To be sure, executives may not receive a bonus if they do not beat their targets in the company’s plan, … [ Read more ]

Content: Quotation | Authors: Frank Plaschke, Gerry Hansell, Lars-Uwe Luther, Mathias Schatt | Source: Boston Consulting Group (BCG) | Subject: Corporate Governance

The real reason CEO compensation got out of hand.

Content: Article | Author: Ray Fisman | Source: Slate | Subject: Corporate Governance

It has been clear since the days of Adolf Berle and Gardiner Means – who published their breakthrough book, The Modern Corporation and Private Property, in 1932 – that business ownership is often separated from its most vital element, control. These [for-benefit business] designs go further by concentrating control in a deliberately chosen group, selected as stewards of the firm’s living mission. Ownership shares can … [ Read more ]

Content: Quotation | Author: Marjorie Kelly | Source: strategy+business | Subjects: Corporate Governance, Miscellaneous

Bernie Madoff, Lee Kun Hee and, less recently, WorldCom, Parmalat and Enron. In the wake of all this white-collar crime, people are calling for corporate social action. A Stakeholder Management approach could be the answer. But when a CEO is juggling everyone from employees to charities, the water surrounding their actions and results becomes murky. In “Does Stakeholder Management Have a Dark Side,” Carmelo Cennamo, … [ Read more ]

Content: Article | Authors: Carmelo Cennamo, Luis R. Gómez-Mejía, Pascual Berrone | Source: IESE Insight | Subjects: Corporate Governance, Management

If most companies aren’t delivering demonstrably exceptional performance, what is the justification for granting demonstrably exceptional compensation to senior executives? Rare indeed is the pay-for-performance contract that seeks to pay only for performance by separating out the effects of luck from the contributions of the skill and effort of the executive.

Content: Quotation | Author: Michael E. Raynor | Source: The Conference Board Review | Subjects: Compensation, Corporate Governance

The typical manager of financial assets generates returns based on the systematic risk he takes – the so-called beta risk – and the value his abilities contribute to the investment process – his so-called alpha. Shareholders in asset management firms, such as commercial banks, investment banks and private equity or insurance companies are unlikely to pay the manager much for returns from beta risk. What … [ Read more ]

Content: Article | Author: Raghuram G. Rajan | Source: Financial Times | Subjects: Corporate Governance, Finance

Today the management, monitoring, and governance of a business are increasingly seen as separate functions to be done by separate bodies, even if some of the membership of those bodies overlaps. This is the corporate equivalent of the separation of powers. Management is the executive function, responsible for delivering the goods. Monitoring is the judicial function, responsible for seeing that the goods are delivered according … [ Read more ]

Content: Quotation | Author: Charles Handy | Source: Harvard Business Review | Subjects: Corporate Governance, Management

Transparency is often just as effective as a rigidly applied rule book and is usually more flexible and less expensive to administer.

Content: Quotation | Author: Gary Hamel | Source: Harvard Business Review | Subjects: Corporate Governance, Management, Organizational Behavior

The CEO’s reputation undoubtedly has an influence on the prestige of the business, but what determines the good name of the CEO? A survey of top Spanish CEOs reveals that personal credibility and offering a strategic vision are considered paramount. Surprisingly, ethical behavior was nudged off the Top 10, while good corporate governance and social and environmental responsibility came in even lower.

Content: Article | Authors: José Ramón Pin, Lourdes Susaeta, María Jesús Belizón | Source: IESE Insight | Subjects: Corporate Governance, Leadership, Management

In some ways, corporations are like liberal democracies. The shareholders of a company are like the people in whose interest the enterprise is run. The executive is like the government and the key to making it run successfully are the institutions that provide the checks and balances: the judiciary, the army, and bodies like the Federal Reserve Board in America have their counterparts in the … [ Read more ]

Content: Quotation | Author: Amit Varma | Source: European Business Forum (EBF) | Subjects: Accountability, Corporate Governance, Social Responsibility (ESG)

While not as impressive as the headline “funny money” payments to a handful of executives, severance costs are not the only direct, cash costs incurred when CEO failure occurs.

Content: Article | Authors: Claire Wyckoff, Nat Stoddard | Source: Chief Executive | Subject: Corporate Governance

This study investigates the relation between the use of compensation consultants and CEO pay levels. Using new proxy statement disclosures from 2,116 companies, we examine claims that pay is higher in clients of compensation consultants, and test whether any pay differences in users and non-users of consultants are due to differences in economic or corporate governance characteristics. We find that CEO pay is generally higher … [ Read more ]

Content: Article | Authors: Chris Armstrong, Christopher D. Ittner, David Larcker | Source: Social Science Research Network (SSRN) | Subject: Corporate Governance

Most managers in the United States would shed workers to sustain profitability, whereas Japanese firms often consider job security one of their primary concerns. Both approaches, and their economic impact, can be explained through insider and outsider models of corporate governance. A new study examines the different results of similar corporate governance models by studying firms in different countries and closely examining the relationship between … [ Read more ]

Content: Article | Authors: Miguel Ángel Ariño, Miguel Ángel Rodríguez, Roberto García, Silvia Ayuso | Source: IESE Insight | Subject: Corporate Governance

Functioning as an independent oversight group, the board of directors is expected to act in the best interests of a company’s shareholders. But boards that are heavy with outside CEOs are sometimes viewed as being in league with the company’s own executive leadership, lacking the distance necessary to provide unbiased oversight. This study examines why companies choose to appoint CEO directors and who their presence … [ Read more ]

Content: Related Content | Authors: Angie Low, René M. Stulz, Rüdiger Fahlenbrach | Source: Ohio State University | Subject: Corporate Governance

This note addresses how performance management—the integration and application of the right information within decision-making processes and enabled by technology—may improve governance and reduce information asymmetry. Typical hazards of information asymmetry include missing financial projections by a wide margin, letting knowable risks knock a company off kilter or being unaware when management action might damage corporate reputation.

Integrating performance management into the board agenda should minimize … [ Read more ]

Content: Article | Authors: Anthony J. Relvas, George Marcotte, Joshua J. Bellin, Robert J. Thomas | Source: Accenture | Subject: Corporate Governance

Inc. magazine offers a list of suggestions for selecting, attracting, and running a good board of advisers.

Content: Article | Source: Inc. Magazine | Subjects: Best Practices, Corporate Governance

A study by Stanford law and business faculty members casts strong doubt on the value and validity of the ratings of governance advisory firms that compile indexes to evaluate the effectiveness of a publicly held company’s governance practices. “Everyone would agree that corporate governance is a good thing,” said Business School Professor David Larcker, “but can you measure it without even talking to the companies … [ Read more ]

Content: Article | Authors: David Larcker, Ian Gow, Robert Daines | Source: Stanford University | Subject: Corporate Governance

The last few years have seen a mountain of legislation aimed at improving transparency around executive pay. So why is the controversy no closer to being settled?

Content: Article | Author: Jordan Otten | Source: European Business Forum (EBF) | Subject: Corporate Governance