Book contents
- Frontmatter
- Contents
- Acknowledgments
- Prologue: The Compensation Committee Meets
- Introduction: The Battle over Executive Compensation
- 1 The Myths and Realities of Pay-for-Performance
- 2 Managerial Power
- 3 External Pressures: The New Context for Executive Compensation
- 4 End of an Era: The Decline of the Stock Option
- 5 The Future of Long-Term Incentives
- 6 Executive Stock Ownership: The Solution to the Executive Compensation Crisis
- 7 Director Compensation in the New Environment
- 8 The Compensation Committee: Creating a Balance between Shareholders and Executives
- 9 Aligning All Employee Pay to Improve Corporate Performance
- 10 International Executive Pay Comparisons
- Conclusion: The Future of Executive Compensation
- Epilogue: Back in the Boardroom
- Appendix A Legal and Regulatory Requirements for Executive Compensation Plans
- Appendix B Summary of the Regulatory and Institutional Mandates and Recommendations
- Appendix C Academic Articles on Pay-for-Performance and the Effectiveness of the Executive Labor Market
- Notes
- Index
1 - The Myths and Realities of Pay-for-Performance
Published online by Cambridge University Press: 31 July 2009
- Frontmatter
- Contents
- Acknowledgments
- Prologue: The Compensation Committee Meets
- Introduction: The Battle over Executive Compensation
- 1 The Myths and Realities of Pay-for-Performance
- 2 Managerial Power
- 3 External Pressures: The New Context for Executive Compensation
- 4 End of an Era: The Decline of the Stock Option
- 5 The Future of Long-Term Incentives
- 6 Executive Stock Ownership: The Solution to the Executive Compensation Crisis
- 7 Director Compensation in the New Environment
- 8 The Compensation Committee: Creating a Balance between Shareholders and Executives
- 9 Aligning All Employee Pay to Improve Corporate Performance
- 10 International Executive Pay Comparisons
- Conclusion: The Future of Executive Compensation
- Epilogue: Back in the Boardroom
- Appendix A Legal and Regulatory Requirements for Executive Compensation Plans
- Appendix B Summary of the Regulatory and Institutional Mandates and Recommendations
- Appendix C Academic Articles on Pay-for-Performance and the Effectiveness of the Executive Labor Market
- Notes
- Index
Summary
The work of those who criticize CEO pay, although appealing, simply does not “prove” that any particular CEO is overpaid, much less that an entire class of CEOs is overpaid. What is lacking in such work is some indication of what the CEOs would earn if the market for their services were more efficient. In the absence of evidence that the “overpaid” individuals would have been willing to accept less for their services, or that CEOs occupy some sort of monopoly position regarding executive services, it is difficult to accept the proposition as proven.
Mark J. Loewenstein, professor, University of Colorado School of LawThe perception among reporters and other [critics] that the corner suite is a sinecure with huge rewards and little accountability bears no resemblance to present reality. Fully half of the Fortune 1,000 companies have replaced their man at the top since 2000.
“Off with Their Heads,” editorial, Wall Street Journal, August 1, 2006The full-blown mythology of a corporate America ruled by executive greed and excess consists of two related components: a failed pay-for-performance model and managerial power. The myth of the failed pay model hinges on the idea that the link between executive compensation and corporate performance never truly existed and therefore does not determine executive pay levels. The myth of excessive managerial power accepts the idea of a failed model and puts in its service the image of unchecked executives dominating subservient boards as the explanation for decisions resulting in excessive executive pay.
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- Myths and Realities of Executive Pay , pp. 8 - 27Publisher: Cambridge University PressPrint publication year: 2007