Academic Research on Executive Compensation

• Pay without performance: The unfulfilled promise ofexecutive compensation, Coco, M., & Christian, A. (2006). The article reviews the book Pay Without Performance: The Unfulfilled Promise of Executive Compensation, by Lucian Bebchuk and Jesse Fried.
• Executive compensation, Murphy, K. J. (1999). Handbook of labor economics,3, 2485-2563. This chapter summarizes the empirical and theoretical research on executive compensation and provides a comprehensive and up-to-date description of pay practices (and trends in pay practices) for chief executive officers (CEOs).
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• Executive compensationstructure, ownership, and firm performance, Mehran, H. (1995). Journal of financial economics,38(2), 163-184. This paper analyses the factors which motivate managers to increase firm value. Samples collected from a survey of 153 randomly selected firm from the period of 1979 to 1980 is used as evidence to support this claim.
• Institutional investors andexecutive compensation, Hartzell, J. C., & Starks, L. T. (2003). The journal of finance,58(6), 2351-2374. This paper suggests that the institutions serve a monitoring role in mitigating the agency problem between shareholders and managers. It goes on to show that clientele effects exist among institutions for firms with certain compensation structures, suggesting that institutions also influence compensation structures through their preferences.
• Executive compensation, management turnover, and firm performance: An empirical investigation, Coughlan, A. T., & Schmidt, R. M. (1985). Journal of accounting and economics,7(1-3), 43-66. This paper investigates the internal managerial control mechanisms at the disposal of a corporation's compensation-setting board or committee. The objective is to show that firm's board creates managerial incentives consistent with those of the firm's owners, both by setting compensation and following management change policies which benefit shareholders.
• Executive compensationas an agency problem, Bebchuk, L. A., & Fried, J. M. (2003). Journal of economic perspectives,17(3), 71-92. This paper provides an overview of the main theoretical elements and empirical underpinnings of a managerial power' approach to executive compensation. It further explains how managerial influence might lead to substantially inefficient arrangements that produce weak or even perverse incentives.
• Executive compensation and executiveincentive problems: An empirical analysis, Lewellen, W., Loderer, C., & Martin, K. (1987).Journal of accounting and economics,9(3), 287-310. This paper addresses the question of whether the design of the corporate executive pay package reflects an attempt to reduce agency costs between shareholders and managers. The components of senior executive pay are found to vary systematically across firms in a manner that cannot easily be explained by tax effects, and which would indicate that individual elements of pay are aimed at controlling for limited horizon and risk exposure problems. Managerial decisions and the structure of managerial pay therefore appear to be interrelated.
• Managerial power and rent extraction in the design of executive compensation, Bebchuk, L. A., Fried, J. M., & Walker, D. I. (2002).Managerial power and rent extraction in the design of executive compensation(No. w9068). National bureau of economic research. This paper develops an account of the role and significance of managerial power and rent extraction in executive compensation. The authors show that the processes that produce compensation arrangements, and the various market forces and constraints that act on these processes, leave managers with considerable power to shape their own pay arrangements. This leads to the conclusion that the role managerial power plays in the design of executive compensation is significant and should be taken into account in any examination of executive pay arrangements or of corporate governance generally.
• Chiefexecutive compensation: A study of the intersection of markets and political processes, Finkelstein, S., & Hambrick, D. C. (1989). Strategic Management Journal,10(2), 121-134. This study analyses sample from a leisure company to aid the development of a model for the determinants of chief executive officer (CEO) compensations. This study finds that CEOs pay has complex relations to different factors. This paper also includes a separate examination of CEO salary and bonus as well as a test of pay determination across McEachern's (1975) ownership categories.
• Portfolio considerations in valuing executive compensation, Lambert, R. A., Larcker, D. F., & Verrecchia, R. E. (1991). Journal of Accounting Research, 129-149. This paper analyses the value to a poorly diversified risk-averse executive of acompensation package consisting of a risk free asset, restricted stock and stock options. The Lambert, Larcker and Verrecchia (1991) model is extended to include leverage and this facilitates comparison of cost to the firm and benefits to the executive of restricted stock and stock options.
• Executive compensationand principal-agent theory, Garen, J. E. (1994). Journal of political economy,102(6), 1175-1199. This paper analyses the shortcomings of the empirical literature on executive compensation, where this literature is unable to base and test hypotheses regarding its determinant. This paper analyses a simple principal-agent model to determine how well it explains variations in CEO incentive pay and salary.
• Accounting earnings and topexecutive compensation, Sloan, R. G. (1993). Journal of accounting and Economics,16(1-3), 55-100. This paper investigates the role of accounting earnings in top executive compensation contracts. It provides evidence in support of the hypothesis that earnings-based incentives help shield executives from market-wide factors in stock prices. The paper demonstrates that earnings reflect firm-specific changes in value, but are less sensitive to market-wide movements in equity values.