CEO stock ownership guidelines impact firm performance and CEO incentives significantly.
The article looks at why CEOs adopt stock ownership guidelines and how it affects their companies. Some CEOs set guidelines above their own stock ownership, while others set them below. Companies where guidelines are set below CEO ownership see better performance and alignment with CEO incentives. Companies where guidelines match CEO ownership don't see much change. CEO pay doesn't change much after guidelines are adopted. Companies with guidelines below CEO ownership do better in terms of performance and stock value. The reasons for adopting guidelines and their effects depend on how strict the guidelines are compared to CEO ownership.