Pay without Performance: The Unfulfilled Promise of Executive Compensation

Pay without Performance: The Unfulfilled Promise of Executive Compensation

by Lucian Bebchuk, Jesse Fried

Hardcover

$24.95

Product Details

ISBN-13: 9780674016651
Publisher: Harvard University Press
Publication date: 11/28/2004
Pages: 304
Product dimensions: 6.56(w) x 9.56(h) x 1.03(d)

About the Author

Lucian Bebchuk is Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance at Harvard Law School.

Jesse Fried is Professor of Law and Co-Director of the Berkeley Center for Law, Business, and the Economy at the University of California, Berkeley.

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

What People are Saying About This

Lucian Bebchuk and Jesse Fried have brought to light one of the most important issues facing our society today. I agree enthusiastically and almost completely with their analysis of the problem.

Arthur Levitt

Lucian Bebchuk and Jesse Fried have brought to light one of the most important issues facing our society today. I agree enthusiastically and almost completely with their analysis of the problem.
Arthur Levitt, Jr., former SEC Chairman

Graef Crystal

Bebchuk and Fried have written a superb book. It will benefit academics and non-academics alike, and shed much light on the great executive pay debate.
Graef Crystal, author of In Search of Excess

John Coffee

Bebchuk and Fried, careful scholars of the first rank, develop a compelling critique of the market for managerial services. Pay is decoupled from performance. Executive compensation is neither fair nor efficient, operating as much on stealth as on open negotiation. Their evidence, their conclusions, and their recommendations cannot be ignored: they should be studied by boards, courts, the SEC-and anyone who wants contemporary corporate governance to work.
John Coffee, Jr., Columbia Law School

John C. Bogle

Like Thomas Paine's Common Sense in an earlier era, Pay Without Performance is a terse manifesto for our age of manager's capitalism--a crystal clear and dispassionate, but ultimately devastating, analysis of how our deeply flawed system of corporate governance has led to grossly excessive executive compensation. This is a book that must be read, not only by any citizen who cares about sound corporate governance, but by any citizen who cares about our society--the best book that I've ever read on the subject.
John C. Bogle, Founder, The Vanguard Group

Ira Kay

A profound and insightful analysis of the crisis in executive compensation.
Ira Kay, WatsonWyatt

Joseph Stiglitz

Bebchuk and Fried present a powerful challenge to financial economists' view that compensation arrangements are designed by boards seeking to increase shareholder value. They offer a compelling account of how managers' influence has distorted executive pay. By showing how boards have failed to guard shareholder interests, Bebchuk and Fried raise fundamental questions concerning our corporate governance system and lay the ground for their proposed reforms. Their work will shape debates on executive compensation and corporate governance for years to come.
Joseph Stiglitz, Nobel Laureate in Economics, and author of The Roaring Nineties

Oliver Hart

Bebchuk and Fried argue persuasively that executives of large companies have immense power, and that they use this power to pay themselves large amounts that are insufficiently related to performance. Nobody who reads this book will feel quite the same about Corporate America again.
Oliver Hart, Harvard University, and author of Firms, Contracts, and Financial Structure

John Kenneth Galbraith

The most important change in corporate structure in the United States has been the shift of authority from stockholders and their directors to management. The dominance of management is fact, but the fiction of investor control persists. From management authority comes control of management compensation. That this should be generous, even lavish, and with no necessary relation to performance, is the reality of modern economic life. This literate and learned book is for all who wish to learn the facts and consequences.

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