Law Commons^™

The Law And Economics Of Executive Compensation: Theory And Evidence, David I. Walker

Faculty Scholarship

This chapter from Research Handbook on the Economics of Corporate Law (Claire Hill & Brett McDonnell, eds.) provides an overview of the economic theory and evidence regarding public company executive compensation. It is intended to provide the reader with an entryway into the literature on a select group of topics. Priority has been afforded to the most central issues in executive pay, to issues that implicate law more or less directly, and to issues that have been the primary focus of research in the last decade.

Insider Trading And Ceo Pay, Todd Henderson

Todd Henderson

This Paper presents evidence boards of directors “bargain” with executives about the profits they expect to make from trades in firm stock. The evidence suggests executives whose trading freedom is increased using Rule 10b5-1 trading plans experienced reductions in other forms of pay to offset the potential gains from trading. There are two benefits from trading—portfolio optimization and informed trading profits—and this Paper allows us to isolate them. The data show boards pay executives in a way that reflects the profits they are expected to earn from informed trades. The legal issues about paying using illegal profits are explored. As …

Arbitration Clauses In Ceo Employment Contracts: An Empirical And Theoretical Analysis, Erin O'Hara O'Connor, Kenneth Martin, Randall Thomas

Scholarly Publications

A bill currently pending in Congress would render unenforceable mandatory arbitration clauses in all employment contracts. Some perceive these provisions as employer efforts to deprive employees of important legal rights. Company CEOs are firm employees, and, unlike most other firm employees, they can actually negotiate their employment contracts, very often with attorney assistance. Moreover, many CEO employment contracts are publicly available, so they can be examined empirically. In this paper, we ask whether CEOs bargain to include binding arbitration provisions in their employment contracts. After exploring the theoretical arguments for and against including such provisions in these agreements, we use …

Confident Uncertainty, Excessive Compensation & The Obama Plan, Michael B. Dorff

Indiana Law Journal

Public outrage at the enormous bonuses TARP recipients paid to senior executives recently prompted the Obama administration to impose sweeping new curbs on executive compensation. Shortly thereafter, Senator Dodd added restrictions on executive bonuses to the stimulus bill President Obama subsequently signed. These are understandable political reactions, but will they achieve the twin goals of reducing executive compensation in recipients of federal assistance while spurring better corporate performance? To examine this question, I analyze excessive compensation as the product of "confident uncertainty, "the tendency of even the most sophisticated actors to place unwarranted confidence in their ability to predict the …

Shattering The Equal Pay Act's Glass Ceiling, Deborah Thompson Eisenberg

Deborah Thompson Eisenberg

This Article provides the first empirical and rhetorical analysis of all reported Equal Pay Act (EPA) federal appellate cases since the Act’s passage. This analysis shows that as women climb the occupational ladder, the manner in which many federal courts interpret the EPA imposes a wage glass ceiling, shutting out women in non-standardized jobs from its protection. This barrier is particularly troubling in light of data that shows that the gender wage gap increases for women as they achieve higher levels of professional status. The Article begins by examining data regarding the greater pay gap for women in upper-level jobs. …

Shattering The Equal Pay Act's Glass Ceiling, Deborah Thompson Eisenberg

Faculty Scholarship

This Article provides the first empirical and rhetorical analysis of all reported Equal Pay Act (EPA) federal appellate cases since the Act’s passage. This analysis shows that as women climb the occupational ladder, the manner in which many federal courts interpret the EPA imposes a wage glass ceiling, shutting out women in non-standardized jobs from its protection. This barrier is particularly troubling in light of data that shows that the gender wage gap increases for women as they achieve higher levels of professional status. The Article begins by examining data regarding the greater pay gap for women in upper-level jobs. …

Taking Stock—Salary And Options Too: The Looting Of Corporate America, Kenneth R. Davis

Maryland Law Review

No abstract provided.

Say On Pay's Bundling Problems, Andrew C. W. Lund

Kentucky Law Journal

No abstract provided.

Reply: Clawback To The Future, Miriam A. Cherry, Jarrod Wong

Faculty Publications

(Excerpt)

In Clawbacks: Prospective Contract Measures in an Era of Excessive Executive Compensation and Ponzi Schemes (the “Article”), we undertook the task of proposing a doctrine of clawbacks that would not only furnish a framework for analyzing the term more systematically, but would also describe the ways the doctrine would relate to established rules of contract law. With his response, In the Shadow of the Omnipresent Claw: In Response to Professors Cherry & Wong (the “Response”), Michael Macchiarola has provided us with an opportunity to articulate these thoughts on the doctrine of clawbacks further, and for that opportunity and his …

Wasting The Corporate Waste Doctrine: How The Doctrine Can Provide A Viable Solution In Controlling Excessive Executive Compensation, Steven Clayton Caywood

Michigan Law Review

In the midst of the global recession of the late 2000s, there was an outcry against corporate executives and what the public deemed to be their excessive compensation. Although this anger is still featured in today's headlines, it is nothing new. In fact, excessive executive compensation complaints arose when the very concept of a corporation was still new. Most of the complaints that the public has leveled have had little effect on boards of directors' decisions. Occasionally, however the outcry is so great that the public compels a company's leadership to take action. This happened early in 2009 when American …

Bail-Ins Versus Bail-Outs: Using Contingent Capital To Mitigate Systemic Risk, John C. Coffee Jr.

Faculty Scholarship

Because the quickest, simplest way for a financial institution to increase its profitability is to increase its leverage, an enduring tension will exist between regulators and systemically significant financial institutions over the issues of risk and leverage. Many have suggested that the 2008 financial crisis was caused because financial institutions were induced to increase leverage because of flawed systems of executive compensation. Still, there is growing evidence that shareholders acquiesced in these compensation formulas to cause managers to accept higher risk and leverage. Shareholder pressure then is a factor that could induce the failure of a systemically significant financial institution. …

Taking Stock -- Salary And Options Too: The Looting Of Corporate America, Kenneth R. Davis

Kenneth R. Davis

Abstract “Taking Stock – Salary and Options Too: The Looting of Corporate America” Executive compensation has come to mean corporate greed. CEO pay has soared to incomprehensible levels. Even during the current financial crisis, more CEOs saw pay increases than cuts. Public resentment to multi-million dollar paychecks swelled to outrage when AIG and Merrill Lynch used bailout funds to dispense enormous bonuses to executives. The looting of America’s corporations has led to numerous strategies to curb executive compensation. These strategies include heightened corporate disclosure requirements, tax incentives, say-on-pay, and shareholder input into the process for nominating directors. All these strategies …