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Full-Text Articles in Law

Killing Conscience: The Unintended Behavioral Consequences Of "Pay For Performance", Lynn A. Stout Apr 2014

Killing Conscience: The Unintended Behavioral Consequences Of "Pay For Performance", Lynn A. Stout

Cornell Law Faculty Publications

Contemporary lawmakers and reformers often argue that ex ante incentive contracts providing for large material rewards are the best and possibly only way to motivate corporate executives and other employees to serve their firms' interests. This Article offers a critique of the "pay for performance" approach. In particular, it explores why, for a variety of mutually reinforcing reasons, workplaces that rely on ex ante incentive contracts suppress unselfish prosocial behavior (conscience) and promote selfishness and opportunism. The end result may not be more efficient, but more uncooperative, unethical, and illegal employee behavior.


Paying For Risk: Bankers, Compensation, And Competition, Simone M. Sepe, Charles K. Whitehead Feb 2014

Paying For Risk: Bankers, Compensation, And Competition, Simone M. Sepe, Charles K. Whitehead

Cornell Law Faculty Working Papers

Efforts to control bank risk address the wrong problem in the wrong way. They presume that the financial crisis was caused by CEOs who failed to super­vise risk-taking employees. The responses focus on exe­cutive pay, believing that exe­cu­tives will bring non-execu­tives into line—using incen­­­­tives to manage risk-taking—once their own pay is regu­lated. What they over­look is the effect on non-executive pay of the com­pe­­ti­­tion for talent. Even if exe­­cu­tive pay is regu­lated, and exe­cu­tives act in the bank’s best interests, they ...


Lawyers And Fools: Lawyer-Directors In Public Corporations, Lubomir P. Litov, Simone M. Sepe, Charles K. Whitehead Jan 2014

Lawyers And Fools: Lawyer-Directors In Public Corporations, Lubomir P. Litov, Simone M. Sepe, Charles K. Whitehead

Cornell Law Faculty Publications

The accepted wisdom—that a lawyer who becomes a corporate director has a fool for a client—is outdated. The benefits of lawyer-directors in today’s world significantly outweigh the costs. Beyond monitoring, they help manage litigation and regulation, as well as structure compensation to align CEO and shareholder interests. The results have been an average 9.5% increase in firm value and an almost doubling in the percentage of public companies with lawyer-directors.

This Article is the first to analyze the rise of lawyer-directors. It makes a variety of other empirical contributions, each of which is statistically significant and ...