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Too Much Is Not Enough

Too Much Is Not Enough Incentives in Executive Compensation

Name: Too Much Is Not Enough
Brand: Oxford University Press USA
SKU: 9780199829583
Price: 436.50 HKD
Availability: OutOfStock
Author: Robert W. Kolb
ISBN: 9780199829583

By Robert W. Kolb

Oxford University Press USA August 2012

Specifications

ISBN-13: 9780199829583
Publisher: Oxford University Press USA
Publication: August 2012
Format: Hardback , 240 pages
Jurisdiction: U.S. ? Countri(es) for reference only

Details

The first book to offer a good survey of the empirical data on the actual results of various incentive scheme studies
Many of the most interesting issues raised by the book are just now becoming central to the academic debate about incentives in the boardroom

The scholarly literature on executive compensation is vast. As such, this literature provides an unparalleled resource for studying the interaction between the setting of incentives (or the attempted setting of incentives) and the behavior that is actually adduced. From this literature, there are several reasons for believing that one can set incentives in executive compensation with a high rate of success in guiding CEO behavior, and one might expect CEO compensation to be a textbook example of the successful use of incentives. Also, as executive compensation has been studied intensively in the academic literature, we might also expect the success of incentive compensation to be well-documented. Historically, however, this has been very far from the case.

In Too Much Is Not Enough, Robert W. Kolb studies the performance of incentives in executive compensation across many dimensions of CEO performance. The book begins with an overview of incentives and unintended consequences. Then it focuses on the theory of incentives as applied to compensation generally, and as applied to executive compensation particularly. Subsequent chapters explore different facets of executive compensation and assess the evidence on how well incentive compensation performs in each arena. The book concludes with a final chapter that provides an overall assessment of the value of incentives in guiding executive behavior. In it, Kolb argues that incentive compensation for executives is so problematic and so prone to error that the social value of giving huge incentive compensation packages is likely to be negative on balance. In focusing on incentives, the book provides a much sought-after resource, for while there are a number of books on executive compensation, none focuses specifically on incentives. Given the recent fervor over executive compensation, this unique but logical perspective will garner much interest. And while the literature being considered and evaluated is technical, the book is written in a non-mathematical way accessible to any college-educated reader.

Readership: Scholars and students of finance and corporate governance, business administration, and management, as well as those who study the economics of incentives, and of labor compensation.

Preface

1. The Magnitude and Structure of Executive Compensation

The Magnitude of CEO Compensation
The Structure of Executive Compensation
Salary
Bonuses and Long-Term Incentive Plans
Restricted Stock Awards
Executive Stock Option (ESO) Awards
Other Forms of Compensation

2. Corporate Governance, Agency Problems, and Executive Compensation

Corporate Governance
Agency Theory and Incentive Alignment
Corporate Governance, Incentive Alignment, and the Managerial Power Hypothesis
The Levers of Managerial Power
Limits to Pay on the Managerial Power Hypothesis
Assessing the Conceptual Conflict Between the Agency-Theoretic and Managerial Power Views of Executive Compensation
What about Ethics, Duty, and Justice?
Fiduciary Duty
Executive Compensation and Distributive Justice

3. The Incentive Structure of Executive Compensation

The Incentive Revolution and Executive Compensation
Salary
Bonuses
Restricted Stock and Performance Shares
Executive Stock Options
Equity Compensation: Retaining the Employees You Have, and Attracting the Ones You Want
Different Instruments as Tools of Incentive Compensation

4. Executive Stock Options and the Incentives They Create

ESO Incentives, Firm Practices, and the Effect of Accounting Rules
Option Pricing Models
Option Valuation Effects of Individual Option Parameters
The Option Pricing Model and Incentives
Executive Stock Option Design, Management, and Incentives
What Exercise Price?
Repricing and Reloading Executive Stock Options
The CEO's Utility and the Desire for ESOs

5. Executive Stock Option Programs: The Behavior of CEOs, Firms, and Investors

CEO Wealth, Pay, and Performance
Exercise of ESOs
BOX 1: Detecting Abnormal Stock Market Performance
Unwinding Incentives

6. Executive Incentives and Risk-Taking

Equity Compensation and the CEO's Risk Appetite
Executive Compensation and the Risk-Taking Behavior of CEOs
Incentive Compensation, Risk-Taking, and the Financial Crisis of 2007-2009

7. Incentive Compensation and the Management of the Firm

Incentive Compensation and the Firm's Investment Program
CEO Incentives and the Firm's Financing Decisions
Compensation Incentives, Dividends, and Share Repurchases,
Corporate Mergers, Acquisitions, and Liquidations
Compensation Incentives and Corporate Risk Management
Compensation Incentives and Corporate Disclosures

8. Perverse Incentive Effects: Executives Behaving Badly

Earnings Management
Option Games and Exploitation
Option Games: A Warning About Incentives in Executive Compensation

9. Incentives in Executive Compensation: A Final Assessment

Incentive Compensation and the Level of Executive Pay
New Legislation and the Shaping of Incentives
How Dysfunctional is Executive Pay?
On Balance, Is Incentive Compensation Beneficial?
To Improve Executive Compensation, Improve Corporate Governance
Executive Pay, Continuing Inequality, and the Question of Justice

Appendix: Binomial Valuation Method for Executive Stock Options

Notes

References

Index

About the Author

Robert W. Kolb, Professor of Finance and Frank W. Considine Chair of Applied Ethics, Loyola University Chicago

Robert W. Kolb is Professor of Finance and Frank W. Considine Chair of Applied Ethics at Loyola University Chicago. He has been professor of finance at the University of Florida, Emory University, the University of Miami, and the University of Colorado, and has published more than 20 books, including Lessons from the Financial Crisis: Causes, Consequences, and Our Economic Future and Futures, Options, and Swaps.