When less is more: : The benefits of limits on executive pay

• Autores: Peter Cebon, Benjamin E. Hermalin
• Localización: Review of Financial Studies, ISSN-e 1465-7368, Vol. 28, Nº. 6, 2015, págs. 1667-1700
• Idioma: inglés
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• Resumen

  • We derive conditions under which limits on executive compensation can enhance efficiency and benefit shareholders (but not executives). Having its hands tied in the future allows a board of directors to credibly enter into relational contracts with executives that are more efficient than performance-contingent contracts. This has implications for the ideal composition of the board. The analysis also offers insights into the political economy of executive-compensation reform.