Business, Management and Accounting
8 years ago

Weak corporate governance leads to higher CEO pay and poorer firm performance.

Journal of Financial Economics
Corporate governance, chief executive officer compensation, and firm performance
John E. Core, Robert W. Holthausen, David F. Larcker

Paper Summary

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The study shows that how a company is run and who owns it affects how much the CEO gets paid. When governance structures are weak, CEOs tend to earn more money. However, companies with weaker governance structures tend to perform worse in terms of operating and stock return performance. This suggests that companies with poor governance have more problems, pay their CEOs more, and perform worse overall.