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The Rise And Fall Of Managerial Adaptive Responses To Incentive Pay, Sharon Hannes
The Rise And Fall Of Managerial Adaptive Responses To Incentive Pay, Sharon Hannes
Sharon Hannes
A commonly-voiced argument ties the current financial crisis to prevailing executive compensation practices. Huge stock-option packages and annual bonuses, the claim goes, caused managers to concentrate on the short-run and overlook the downside of risk-taking. But why did crisis emerge only recently, even though such incentive pay schemes are hardly a new phenomenon? This paper argues that for a long period of time, from the beginning of the 1990s until the beginning of the twenty-first century, managers employed a variety of adaptive tactics in response to option-based compensation and other risk-inducing pay schemes. These practices enabled executives to enrich themselves …
How The Regulation That Followed The Enron Debacle Led To The 2008-2009 Financial Crisis, Sharon Hannes
How The Regulation That Followed The Enron Debacle Led To The 2008-2009 Financial Crisis, Sharon Hannes
Sharon Hannes
A commonly-voiced argument ties the current financial crisis to prevailing executive compensation practices. Huge stock option packages and annual bonuses, the claim goes, caused managers to concentrate on the short-run and overlook the downside of risk-taking. But why did crisis emerge only recently, even though such incentive pay schemes are hardly a new phenomenon? This paper argues that for a long period of time, from the beginning of the 1990s until the beginning of the twenty-first century, managers employed a variety of adaptive tactics in response to option-based compensation and other risk-inducing pay schemes. These practices enabled executives to enrich …
Gatekeeper Incentive Compensation, Sharon Hannes
Gatekeeper Incentive Compensation, Sharon Hannes
Sharon Hannes
A massive wave of corporate fraud in the beginning of the 21st century exposed the failure of corporate gatekeepers. The Sarbanes-Oxley legislation therefore targeted gatekeepers, primarily the auditors, by imposing strict regulation and enhanced independence guidelines. This legislative prescription has arguable benefits while its costs are huge. And, it is still extremely hard to determine from the outside whether the financial statements that were produced at the end of the auditor-client negotiations actually constitute a fair representation of the corporation’s financial position. This paper therefore suggests that a certain type of auditor incentive compensation could work better then regulation. Under …
The Sec Regulation Of Takeovers: Some Doubts From A Game Theory Perspective And A Proposal For Reform, Sharon Hannes, Omri Yadlin
The Sec Regulation Of Takeovers: Some Doubts From A Game Theory Perspective And A Proposal For Reform, Sharon Hannes, Omri Yadlin
Sharon Hannes
In theory, a hostile tender offer poses a threat to the target shareholders who, for strategic reasons, may tender their shares in response to an inferior bid. It has therefore been suggested that the decision to tender be made separately from the shareholder vote on the actual merits of the bid. While the regulator has never adopted this proposal, market forces in the poison pill era did generate a mechanism with a similar effect. To overcome a poison pill (a mechanism implemented by managers to thwart bids), the bidder must win the shareholders’ vote in a proxy contest that is …