Perspectives on Corporate Governance: Executive Compensation

Part of our Case In Point series...
Author: Levine, David I.
Source: The Aspen Institute Business and Society Program
Year: 2007

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Abstract:

This article is available for download below to all users of CasePlace.org. More than a fourth of companies granting stock options manipulated the date of the option grant at some time or another. This behavior represents top managers surreptitiously paying themselves more at the expense of shareholders. This behavior is both illegal and apparently common. The pervasiveness of top executive law-breaking underscores the broader problem that boards of directors routinely provide incentives for top executives to destroy long-term shareholder value – although happily not all executives respond to these incentives. These scandals raise a serious question for boards of directors: Why use a compensation scheme for top executives that provides incentives for perverse behavior, especially if you believe that your own executives will not indulge in these behaviors? There are many ways in which poorly designed incentives schemes reward executives for destroying long-term shareholder value and (in many cases) breaking the law... The opinions expressed within this piece are the opinions of the author alone and are not shared by the Aspen Institute's Business and Society Program

Our Case Notes

Country: United States of America
Discipline: Business, Government, and Society; Management
Topic: Corporate Governance and Accountability
Product Type: Essays and Concept Papers

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