Does executive compensation put executive interests over shareholder interest?
This topic has received a lot of attention over the years due to spectacular failures and the economic environment. Recently I was perusing the web and came across an advertisement for a book titled “Pay without Performance” by Lucian Bebchuk and Jesse Fried. Part of the description is as follows:
The company is under-performing, its share price is trailing, and the CEO gets…a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers’ influence over their own pay–and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders.
Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm’s length with the executives they are meant to oversee. They give a richly detailed account of how pay practices–from option plans to retirement benefits–have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay…
This brings us to Level 3 Communications (LVLT), a company we’ve followed over the years. The company has disappointed more times than most would like to remember over the long term. We’ll take a look at the CEO’s compensation in an effort to determine if the compensation was tied to shareholder interests.
….Continue reading the full articl at SA