Restricting CEO Pay

Dittmann, Ingolf ; Maug, Ernst ; Zhang, Dan

DOI:	https://doi.org/10.1016/j.jcorpfin.2011.04.007
URL:	https://www.researchgate.net/publication/227352795...
Additional URL:	http://www.sciencedirect.com/science/article/pii/S...
Document Type:	Article
Year of publication:	2011
The title of a journal, publication series:	Journal of Corporate Finance
Volume:	17
Issue number:	4
Page range:	1200-1220
Place of publication:	Amsterdam
Publishing house:	Elsevier
ISSN:	0929-1199
Related URLs:	https://ssrn.com/abstract=1660490
Publication language:	English
Institution:	Business School > ABWL u. Corporate Finance (Maug 2006-)
Subject:	330 Economics
Abstract:	We analyze several proposals to restrict CEO compensation and calibrate two models of executive compensation that describe how firms would react to different types of restrictions. We find that many restrictions would have unintended consequences. Restrictions on total realized (ex-post) payouts lead to higher average compensation, higher rewards for mediocre performance, lower risk-taking incentives, and the fact that some CEOs would be better off with a restriction than without it. Restrictions on total ex-ante pay lead to a reduction in the firm's demand for CEO talent and effort. Restrictions on particular pay components, and especially on cash payouts, can be easily circumvented. While restrictions on option pay lead to lower risk-taking incentives, restrictions on incentive pay (stock and options) result in higher risk-taking incentives.
Additional information:	Auch als ECGI - Finance Working Paper No. 291/2010, s. "Verwandte URLs"