Pay without Performance: The Unfulfilled Promise of Executive Compensation by Lucian BebchukPay without Performance: The Unfulfilled Promise of Executive Compensation by Lucian Bebchuk

Pay without Performance: The Unfulfilled Promise of Executive Compensation

byLucian Bebchuk, Jesse Fried

Paperback | September 30, 2006

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The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders.

Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives.

This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.

Lucian Bebchuk is Professor of Law, Economics, and Finance and Director of Program on Corporate Governance at Harvard Law School.
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Title:Pay without Performance: The Unfulfilled Promise of Executive CompensationFormat:PaperbackDimensions:304 pages, 9.25 × 6.13 × 0.75 inPublished:September 30, 2006Publisher:HarvardLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0674022289

ISBN - 13:9780674022287

Reviews

Table of Contents

Preface

Introduction

PART I. THE OFFICIAL VIEW AND ITS SHORTCOMINGS

1. The Official Story

2. Have Boards Been Bargaining at Arm's Length?

3. Shareholders' Limited Power to Intervene

4. The Limits of Market Forces

PART II. POWER AND PAY

5. The Managerial Power Perspective

6. The Relationship between Power and Pay

7. Managerial Influence on the Way Out

8. Retirement Benefits

9. Executive Loans

PART III. DECOUPLING PAY FROM PERFORMANCE

10. Non-Equity-Based Compensation

11. Windfalls in Conventional Options

12. Excuses for Conventional Options

13. More on Windfalls in Equity-Based Compensation

14. Freedom to Unwind Equity Incentives

PART IV. GOING FORWARD

15. Improving Executive Compensation

16. Improving Corporate Governance

Notes

References

Index

Editorial Reviews

I rate this as an important book that should help to get the academic profession thinking in a new direction. The supporters of the conventional model of compensation clearly have a case to answer, and this book makes it plain what the challenges to developing a better understanding of executive compensation are. Thus, it will surely generate a productive debate...The book should also be seen as a welcome contribution to the corporate-governance debate in Europe, as it provides a sobering perspective on what many regard as a role model. Everybody who wants to participate in the debate on executive compensation should read this book.