Pay without Performance: The Unfulfilled Promise of Executive Compensation by Je

Description: Pay without Performance by Jesse Fried, Lucian Bebchuk As this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. FORMAT Paperback LANGUAGE English CONDITION Brand New Publisher Description The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arms length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers incentives.This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance. Notes 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 Like Thomas Paines Common Sense in an earlier era, Pay Without Performance is a terse manifesto for our age of managers 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 Ive ever read on the subject. -- John C. Bogle, Founder, The Vanguard Group 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 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. -- John Kenneth Galbraith 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 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 A profound and insightful analysis of the crisis in executive compensation. -- Ira Kay, WatsonWyatt 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 Back Cover Repair, enhance, organize, and share your photos - its never been easier!Whether youre a brand-new digital photographer or you get paid to take pictures, Photoshop Elements has something for you - and so does this book. Learn the tools, commands, and workspaces; correct color, brightness, and contrast; create postcards, slide shows, and even movie files; give your photos the look of a fine-art painting, and so much more.Get organized - use the Organizer on a Windows PC or Adobe Bridge on a Mac to sort, find, tag, and catalog your photosMaster simple makeovers - crop photos for better composition, straighten crooked images, remove red-eye, or adjust colorBecome a digital magician - move people or objects in and out of your pictures, change the background, combine multiple images, or replace one color with anotherBring out your inner artist - discover how to add effects with filters, get creative with type, or play with the drawing and painting toolsShare your work - turn your photos into postcards, calendars, greeting cards, and photo books with a few mouse clicksOpen the book and find:How to get images into Elements from a variety of sourcesInstructions for both Windows and Mac usersSimple makeover tips to improve your imagesHow to correct color, contrast, and claritySteps for tagging your photos by geographic locationSecrets for making and modifying selectionsCreative applications for layers, filters, effects, and stylesHow to upload and save images to Photoshop.com Author Biography Lucian Bebchuk is Professor of Law, Economics, and Finance and Director of 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 Arms 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 Review Ever wonder if corporate executives are paid too much? Look at it this way: from 1993 to 2002, the aggregate compensation of the top five executives in all public companies amounted to an astonishing $250 billion, equivalent to 7.5% of all corporate earnings. Defenders of the status quo say that such bloated pay provides managers particularly CEOs with incentives crucial to high performance. Those defenders have not yet read Lucian Bebchuk and Jesse Frieds Pay Without Performance. The authors marshal a formidable arsenal of facts to pick apart the incentives argument, exposing myriad ways in which CEOs have decoupled pay from performance and hidden that fact from investors with the aid of supine corporate directors. The lucidly argued treatise frames the issue not in ethical terms but as a problem of efficiency. As for solutions, Bebchuk and Fried maintain that board directors should be not only more independent of the executives they supervise but also much more dependent on stockholders. If shareholders had the power to alter the composition of the corporate board, the authors argue, directors would be more likely to keep investors interests top of mind when setting CEO salaries and perks. -- Unmesh Kher Time Magazine 20041128 In times both bullish and bearish, there is periodic outrage over huge compensation packages for executives at publicly traded companies. The recent wave of corporate scandals only inflamed concerns that companies boards of directors, too cozy with CEOs, were betraying their duty to shareholders. Reacting, defenders of corporate America have often offered rotten apple theories and other explanations that deny any systemic problem. Inadequate, say Lucian Bebchuk, a professor of law, economics, and finance at Harvard University, and Jesse Fried, a professor of law at the University of California at Berkeley. In Pay Without Performance, the scholars uncover what they say are widespread, persistent, and indeed systemic flaws in compensation arrangements. -- Nina C. Ayoub Chronicle of Higher Education 20041203 Lucian Bebchuk and Jesse Fried offer a devastating critique of the way public companies pay their top executives. Relying on data rather than rhetoric, Fried and Bebchuk describe a diseased system in which executives wield enormous influence over their pay, board members have little incentive to slow the gravy train, and everyone involved goes to great lengths to hide the numbers from shareholders...Those looking for a substantive deconstruction of the system--and a few ideas to fix it--could hardly do better. -- Ben White Washington Post 20041205 In Pay Without Performance, Lucian Bebchuk of Harvard and Jesse Fried of Berkeley set out to identify the failure of corporate governance that allows chief executives compensation to carry on rising with little relation to performance. They point the finger firmly at board directors. The Economist 20041218 For anyone looking for a guide to the debate over American top pay, this book will be indispensable. It is clear, well-argued, fully researched and deeply felt. -- Michael Skapinker Financial Times 20050207 Pay Without Performance is a significant book. It is a well-researched, careful study of a problem that has attracted considerable attention since the 1980s. The authors write well and manage at once to make the book readable and to satisfy the scholars need to see evidence and documentation... Pay Without Performance is an important contribution to the continuing discussion about corporate governance. It will repay a careful reading, and it is likely to achieve the influence it deserves to have. -- Robert G. Kennedy Ethics and Economics This book has important messages about where [the balance between managers, directors, and shareholders] should lie, not just with regard to executive compensation but to governance in general. -- Peter Montagnon Management Today 20050201 If one has time to read only a single book about corporate governance in US publicly traded companies, this is the book to read. -- James A. Fanto International Company and Commercial Law Review [This book] does add to the discourse about executive compensation and corporate governance by offering an alternative view of the factors underlying executive compensation. -- Joseph Gerakos Journal of Pension Economics and Finance I rate this as an important book that should help to get the academic profession thinking in a new direction. The supporters of the conventional model of compensation clearly have a case to answer, and this book makes it plain what the challenges to developing a better understanding of executive compensation are. Thus, it will surely generate a productive debate...The book should also be seen as a welcome contribution to the corporate-governance debate in Europe, as it provides a sobering perspective on what many regard as a role model. Everybody who wants to participate in the debate on executive compensation should read this book. -- Ernst Maug Journal of Institutional and Theoretical Economics 20060101 Promotional 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 Like Thomas Paines Common Sense in an earlier era, Pay Without Performance is a terse manifesto for our age of managers 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 Ive ever read on the subject. -- John C. Bogle, Founder, The Vanguard Group 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 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. -- John Kenneth Galbraith 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 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 A profound and insightful analysis of the crisis in executive compensation. -- Ira Kay, WatsonWyatt 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 Review Quote This book has important messages about where Details ISBN0674022289 Author Lucian Bebchuk Short Title PAY W/O PERFORMANCE Publisher Harvard University Press Language English ISBN-10 0674022289 ISBN-13 9780674022287 Media Book Format Paperback Year 2006 Imprint Harvard University Press Subtitle The Unfulfilled Promise of Executive Compensation Place of Publication Cambridge, Mass Country of Publication United States Illustrations none DOI 10.1604/9780674022287 UK Release Date 2006-09-01 AU Release Date 2006-09-01 NZ Release Date 2006-09-01 US Release Date 2006-09-01 Pages 304 Publication Date 2006-09-01 DEWEY 658.42 Audience Professional & Vocational We've got this At The Nile, if you're looking for it, we've got it. 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