Executive pay

Edmans, Gabaix, and Jenter (2017): “”
Giá máy bắn cá Handbook of the Economics of Corporate Governance, Volume 1

• How much are CEOs paid, in the US and around the world? How has the level and structure of pay changed over time? How does pay differ between public and private firms, and between CEOs and other top executives?
• Is high executive pay justified by the value that great CEOs can create or does it result from CEOs paying themselves as much as possible and boards and investors rubber-stamping this? Or is executive pay instead shaped by taxation and regulation?
• It concludes that “No one perspective can explain all of the evidence and a narrow attachment to one perspective will distort rather than inform our view of executive pay”
• What causes executive pay to vary across firms and industries?
• How does executive pay affect firm performance?
• What are the questions that we don’t yet know the answers to and which would be worth exploring in future research?

Gabaix, Xavier, and Augustin Landier (2008): “”
Quarterly Journal of Economics

• CEO pay has increased rapidly since the 1980's because firms have grown rapidly since the 1980's. The larger the firm, the greater the impact a good CEO can make, so it’s worth paying top dollar for top talent.
• The same arguments do not apply to the pay of average workers, since their actions are less scalable.
• Even small differences in ability between CEOs can explain large differences in pay since small differences have large effects when firms are so large

Von Lilienfeld-Toal and Ruenzi (2014): “”
Giá máy bắn cá Journal of Finance

• Firms where the CEO has a high voluntary share ownership outperform firms where the CEO has a low voluntary share ownership by 4-10%/year
• This may be because incentives work – when CEOs have more shares, they make better decisions. But causality could be in the other direction – when CEOs know that their firm is likely to do well in the future, they ask to be paid in shares rather than cash
• The evidence suggests that it’s the former – incentives work. This is because the effects are stronger when the CEO has greater leeway to under-perform – institutional ownership is low, takeover defenses are strong, and the industry is less competitive

Edmans, Fang, and Lewellen (2017): “”
Review of Financial Studies

• CEOs typically sell their equity when it vests, so they have incentives to boost the short-term stock price. For example, if a CEO was given a large amount of shares in January 2016 with a three-year lock-up period, that period expires in January 2019. So the CEO may try to boost the stock price in January 2019
• When CEOs have more equity vesting, they cut R&D and capital expenditure, and are more likely to just meet or beat analyst earnings forecasts
• They also issue positive earnings guidance and sell their equity shortly after

Flammer and Bansal (2017): “”
Giá máy bắn cá Strategic Management Journal

• When shareholders pass resolutions to implement long-term pay, the stock price rises. Profitability falls in the short-term but increases in the long-term
• Innovation improves – both the number and quality of patents
• Measures of stakeholder value also improve: customers, suppliers, the environment and particularly employees
• To ensure that a company creates more value for society, it may be more effective to tie CEO pay to the long-term, rather than to cut it and redistribute the savings

Bennett et al. (2017): “”
Journal of Financial Economics

• When CEOs have profit targets in their pay schemes, they cut R&D and change accounting policies to try to meet them
• However, they do not use share buybacks to try to meet them
• Non-technical summary, with suggestions for pay reform