Business, Management and Accounting
4 years ago

Executives' Power Over Pay Hurts Shareholder Value, Study Finds

The University of Chicago Law Review
Managerial Power and Rent Extraction in the Design of Executive Compensation
Lucian A. Bebchuk, Jesse M. Fried, David I. Walker

Paper Summary

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The way executives get paid is not always fair. They can use their power to influence their own pay and take more money than they deserve. This can lead to bad pay arrangements that hurt the company and its shareholders. Research shows that executives have a lot of control over their pay, and this can explain why some pay practices seem strange or problematic. So, when looking at how executives get paid, we need to consider the power they have in deciding their own pay.