高管薪酬和激励外文翻译可编辑.docx

高管薪酬和激励外文翻译可编辑.docx

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高管薪酬和激励外文翻译可编辑

高管薪酬和激励外文翻译

外文题目ExecutiveCompensationAndIncentives外文出处AcodemyofManagementPerspectives,20062:

p25-40

外文作者MartinJ.Conyon

原文:

ExecutiveCompensationAndIncentives

MartinJ.Conyon

Executivecompensationisacomplexandcontroversialsubject.Formanyyears,academics,policymakers,andthemediahavedrawnattentiontothehighlevelsofpayawardedtoU.S.chiefexecutiveofficersCEOs,questioningwhethertheyareconsistentwithshareholderinterests.SomeacademicshavefurtherarguedthatflawsinCEOpayarrangementsanddeviationsfromshareholders’interestsarewidespreadandconsiderable.Forexample,LucianBebchukandJesseFriedprovidealucidaccountofthemanagerialpowerviewandaccompanyingevidence.MarianneBertrandandSendhilMullainathantooprovideananalysisofthe‘skimmingview’ofCEOpay.Incontrast,JohnCoreetal.presentaneconomiccontractingapproachtoexecutivepayandincentives,assessingwhetherCEOsreceiveinefficientpaywithoutperformance.Inthispaper,weshowwhathashappenedtoCEOpayintheUnitedStates.Wedonotclaimtodistinguishbetweenthecontractingandmanagerialpowerviewsofexecutivepay.Instead,wedocumentthepatternofexecutivepayandincentivesintheUnitedStates,investigatingwhetherthispatternisconsistentwitheconomictheory.

TheContext:

WhoSetsExecutivePayBeforeexaminingtheempiricalevidencepresentedinthispaper,itisimportanttoconsiderthepay-settingprocessandwhosetsexecutivepay.Thestandardeconomictheoryofexecutivecompensationistheprincipal-agentmodel.Thetheorymaintainsthatfirmsseektodesignthemostefficientcompensationpackagespossibleinordertoattract,retain,andmotivateCEOs,executives,andmanagers.Intheagencymodel,shareholderssetpay.Inpractice,however,thecompensationcommitteeoftheboarddeterminespayonbehalfofshareholders.AprincipalshareholderdesignsacontractandmakesanoffertoanagentCEO/manager.Executivecompensationamelioratesamoralhazardproblemi.e.,manageropportunismarisingfromlowfirmownership.Byusingstockoptions,restrictedstock,andlong-termcontracts,shareholdersmotivatetheCEOtoimizefirmvalue.Inotherwords,shareholderstrytodesignoptimalcompensationpackagestoprovideCEOswithincentivestoaligntheirmutualinterests.Thisisthecontractapproachtoexecutivepay.FollowingCore,Guay,andLarcker,anefficientoroptimalcontractisone“thatimizesthenetexpectedeconomicvaluetoshareholdersaftertransactioncostssuchascontractingcostsandpaymentstoemployees.Anequivalentwayofsayingthisisthatcontractsminimizeagencycosts.”

Severalimportantideasflowfromthisdefinition.First,thecontractreducesmanageropportunismandmotivatesCEOeffortbyprovidingincentivesthroughriskycompensationsuchasstockoptions.Second,theoptimalcontractdoesnotimplya“perfect”contract,onlythatthefirmdesignsthebestcontractitcaninordertoavoidopportunismandmalfeasancebythemanager,giventhecontractingconstraintsitfaces.Third,inthisarrangement,thefirmdoesnotnecessarilyeliminateagencycosts,butinsteadevaluatesthemarginalbenefitsofimplementingthecontractrelativetothemarginalcostsofdoingso.Improvementsinregulationorcorporategovernancecanpossiblyalterthesecostsandbenefits,makingdifferentcontractsdesirable.Moreover,whatisefficientatonepointintimemaynotbeatanother.Improvementsinboardgovernance,forexamplebyaddingindependentdirectors,mayleadtodifferentpatternsofcompensation,stock,andoptioncontractsthataredesirableforonefirmbutnotanother.

AnalternativetheoryisthatCEOssetpay.Thisisthemanagerialpowerview,exemplifiedrecentlybyBebchukandFried.Inthistheory,theboardandcompensationcommitteecooperatewiththeCEOandagreeonexcessivecompensation,settlingoncontractsthatarenotinshareholders’interests.Thisexcesspayconstitutesaneconomicrent,anamountgreaterthannecessarytogettheCEOtoworkinthefirm.TheconstraintstheCEOsfacearereputationlossandembarrassmentifcaughtextractingrents,whatBebchukandFriedcall“outragecosts.”OutragemattersbecauseitcanimposeonCEOsbothmarketpenaltiessuchasdevaluationofamanager’sreputationandsocialcosts?

thesocialcostscomeontopofthestandardmarketcosts.Theyarguethatmarketconstraintsandthesocialcostscomingfromexcessivelyfavorablepayarrangementsarenotsufficientinpreventingconsiderabledeviationsfromoptimalcontracting.

ExecutiveCompensation

ThereissubstantialdisclosureaboutU.S.executivecompensation.TheSecuritiesandExchangeCommissionSECexpandedandenhanceddisclosurerulesforU.S.executivesin1992.Asaresult,theproxystatementsoffirmscontainconsiderabledetailonstockownership,stockoptions,andallcomponentsofcompensationforthetopfivecorporateexecutives.Therearefourbasiccomponentstoexecutivepay,eachhavingbeenthesubjectofmuchresearch.First,executivesreceiveabasesalary,whichisgenerallybenchmarkedagainstpeerfirms.Second,theyenjoyanannualbonusplan,usuallybasedonaccountingperformancemeasures.Third,executivesreceivestockoptions,whichrepresentaright,butnottheobligation,topurchasesharesinthefutureatsomepre-specifiedexerciseprice.Lastly,payincludesadditionalcompensationsuchasrestrictedstock,long-termincentiveplans,andretirementplans.

ExecutiveIncentives

Wenowturntoexecutiveincentivesandthelinkbetweenpayandfirmperformance.Theevidencedemonstratesthatexecutivecompensationandthefractionofpayaccountedforbyoptiongrantsincreasedduringthe1990s.Principal-agenttheorypredictsthatafirmdesignscontractsinordertoyieldoptimalincentives,thereforemotivatingtheCEOtoimizeshareholdervalue.Indesigningthecontract,thefirmrecognizestheCEOisriskaverse.Thus,imposinggreaterincentivesrequiresmorepaytocompensatetheagentforincreasedrisk.Intheprevioussection,thepaperdemonstratedthatCEOpayhasincreased.Next,weexaminewhathashappenedtoCEOincentives.TheanalysisshowsthatexecutiveshaveconsiderableequityincentivesthatcreateastrongandincreasinglinkbetweenCEOwealthandfirmperformance.Thisfindingseemsatoddswiththenotionthatexecutivepayandperformancearedecoupled.Itis,however,consistentwithothereconomicevidence,showingthatthelinkbetweenpayandperformancehasbeenincreasingintheUnitedStates.

Executivesreceiveincentivesfromseveralsources.Theyreceivefinancialincentivesfromsalaryandbonus,aswellasnewgrantsofoptionsandrestrictedstock,whichtogethermeasureflowcompensation.Theyalsoreceiveincentivesfromchangesintheiraggregateholdingsofstockandoptionsinthefirm,asdescribedindetailbelow.Finally,theprobabilityofterminationbecauseofpoorperformancegivestheCEOanincentivetopursuestrategiesthatimizefirmvalue.Inthiscase,ifterminated,anexecutivesuffersreputationlossandhumancapitaldevaluationinthemanageriallabormarket.However,thispaper?

consistentwithotherrecentresearchinfinancialeconomics?

focusesoncompensationandequityincentives,leavingasidecareerconcernsandthelabormarketformanagerialtalent.Inotherwords,itrestrictsattentiontofinancialincentives.

Thekeytounderstandingfinancialincentivesisrecognizingthattheyarisefromtheentireportfolioofequityholdingsandnotsimplyfromcurrentpay.Equityincentives,then,aretheincentivestoincreasethestockpricearisingfromthemanagers’ownershipoffinancialsecuritiesinthefirm.Forexample,aCEOmayreceive100,000optionsthisyear,whichmightaddto400,000optionsgrantedinpreviousyears,foratotalof500,000optionsheld.Ifthestockpricedecreases,thenthevalueofthe100,000optionsgrantedthisyeardeclines?

butsodoesthevalueoftheoptionsaccumulatedfrompreviousyears.SincetheCEOwillcareaboutthewholestockof500,000options,notsimplythisyear’s100,000,executivecompensationreceivedinanygivenyearprovidesonlyapartialpictureofCEOwealthandincentives.TounderstandCEOincentivesfully,itisimportanttofocusontheaggregateamountofshares,restrictedstock,andstockoptionsthattheCEOownsinthefirm.

TheevidenceshowsthatCEOshaveplentyoffinancialincentives,arisingprimarilyfromCEOownershipofstockandoptionsintheirfirms.Again,wewouldstressthatsuchfinancialincentivesareonlyonefactormotivatingexecutives.Agentsareaslikelytobemotivatedbyintrinsicfactorsofthejob,careerconcerns,socialnorms,tournaments,andthelike.Oneproblemwithstockoptionsandotherformsofincentivepayisnotthattheyprovidetoofewincentives,butthattheymayleadtounintendedconsequences.Itiswellknownthatincentivescanbringaboutbehaviorbytheagentthatwasunanticipatedbytheprincipal.Inaclassicpaper,StevenKerrhighlightedthefollyofrewardingAwhilehopingforB.Inshort,hearticulatedthenotionthatonegetswhatonepaysfor.IfonerewardsactivityAandnotB,thenpeoplewillexerteffortonA,whilede-emphasizingB.Kerrillustrateshispointwithanarrayofexamplesfrompolitics,industry,andhumanresourcemanagement.Ingeneral,thisisaproblemofprovidingappropriateincentivestoagentsengaginginmultipletasks.Morerecently,RobertGibbonshasdiscussedthedesignofincentiveprogramsrecognizingsuchproblems.

Anotherproblemwithincentivecompensationisthatitmayencourageopportunisticbehaviorbymanagers,manipulationofperformancemeasures,