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Executive Compensation In America: Optimal Contracting Or Extraction Of Rents?, Lucian A. Bebchuk, Jesse M. Fried, David I. Walker
Executive Compensation In America: Optimal Contracting Or Extraction Of Rents?, Lucian A. Bebchuk, Jesse M. Fried, David I. Walker
Faculty Scholarship
This paper develops an account of the role and significance of rent extraction in executive compensation. Under the optimal contracting view of executive compensation, which has dominated academic research on the subject, pay arrangements are set by a board of directors that aims to maximize shareholder value by designing an optimal principal-agent contract. Under the alternative rent extraction view that we examine, the board does not operate at arm's length; rather, executives have power to influence their own compensation, and they use their power to extract rents. As a result, executives are paid more than is optimal for shareholders and, …
The Overlooked Corporate Finance Problems Of A Microsoft Breakup, David I. Walker
The Overlooked Corporate Finance Problems Of A Microsoft Breakup, David I. Walker
Faculty Scholarship
The paper identifies problems with the ordered breakup of Microsoft that seem to have been completely overlooked by the government, the judge, and the commentators. The breakup order prohibits Bill Gates and other large Microsoft shareholders from owning shares in both of the companies that would result from the separation. Given this prohibition, we show, dividing the securities in the resultant companies among the shareholders is not as straightforward as the government has suggested. Any method of distributing the securities that would comply with this mandate would either (i) impose a significant financial penalty on Microsoft's large shareholders that is …
Employee Benefits Law: Foreword, Maria O'Brien
Employee Benefits Law: Foreword, Maria O'Brien
Faculty Scholarship
Over the past twenty or so years, the range of employee benefits offered by employers - both large and small - has expanded dramatically. The old (and relatively short) list of "fringes" typically included health insurance, a pension plan, paid holidays and group life insurance. There was, of course, some variation in this list, especially across industries. But, by and large, employers did not concern themselves in a formal way with "modern" benefits such as elder care, child care, legal assistance, flex time, and parental leaves. As a recent study by the Society for Human Resource Management' suggests, employers have …