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- Title
Corporate Governance Reform and CEO Compensation: Intended and Unintended Consequences.
- Authors
Matsumura, Ella Mae; Jae Yong Shin
- Abstract
Recent scandals allegedly linked to CEO compensation have brought executive compensation and perquisites to the forefront of debate about constraining executive compensation and reforming the associated corporate governance structure. We briefly describe the structure of executive compensation, and the agency theory framework that has commonly been used to conceptualize executives acting on behalf of shareholders. We detail some criticisms of executive compensation and associated ethical issues, and then discuss what previous research suggests are likely intended and unintended consequences of some widely proposed executive compensation reforms. We explicitly discuss the following recommendations for reform: require greater independence of compensation committees, require executives to hold equity in the corporation, require greater disclosure of executive compensation, increase institutional investor involvement in corporate governance (including executive compensation), and require firms to expense stock options on their income statements. We provide a brief summary discussion of ethical issues related to executive compensation, and describe possible future research.
- Subjects
UNITED States; CORPORATE governance; COMPENSATION management; EXECUTIVE compensation; STOCK options; REFORMS; AGENCY theory; INSTITUTIONAL investors; FINANCIAL disclosure; ORGANIZATIONAL transparency; ETHICS; ACCOUNTING
- Publication
Journal of Business Ethics, 2005, Vol 62, Issue 2, p101
- ISSN
0167-4544
- Publication type
Article
- DOI
10.1007/s10551-005-0175-7