IDEAS home Printed from https://ideas.repec.org/a/now/jnllfa/108.00000030.html
   My bibliography  Save this article

The Politics of Pay: The Unintended Consequences of Regulating Executive Compensation

Author

Listed:
  • Murphy, Kevin J.
  • Jensen, Michael C.

Abstract

The persistent outrage over CEO pay expressed by politicians, the press, media, labor unions, and the general public (but not shareholders) have prompted the imposition of a wide range of disclosure requirements, tax policies, accounting rules, governance reforms, direct legislation, and other rules constraining executive compensation stretching back nearly a century. We analyze the regulations that have substantially damaged the efficacy of CEO pay practices, ranging from the first disclosure rules in the 1930s to the 2018 Trump tax rules. We discuss the political forces behind the regulatory interventions, and assess the continuing unintended consequences of these interventions. Our emerging conclusion is that the best way the government can fix executive compensation is to stop trying to fix it, and by undoing the damage already caused through existing regulations that have, in aggregate, imposed enormous costs on organizations, their shareholders, and social welfare.

Suggested Citation

  • Murphy, Kevin J. & Jensen, Michael C., 2018. "The Politics of Pay: The Unintended Consequences of Regulating Executive Compensation," Journal of Law, Finance, and Accounting, now publishers, vol. 3(2), pages 189-242, December.
    • Handle: RePEc:now:jnllfa:108.00000030
    DOI: 10.1561/108.00000030
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1561/108.00000030
    Download Restriction: no
    File URL: https://libkey.io/10.1561/108.00000030?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ilona Babenko & Benjamin Bennett & John M Bizjak & Jeffrey L Coles & Jason J Sandvik, 2023. "Clawback Provisions and Firm Risk," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 12(2), pages 191-239.
    2. Florian Hoffmann & Roman Inderst & Marcus Opp, 2022. "The Economics of Deferral and Clawback Requirements," Journal of Finance, American Finance Association, vol. 77(4), pages 2423-2470, August.
    3. Guo, Xiaohu & Gupta, Vishal K. & Jackson, William E. & Mortal, Sandra C., 2021. "Is there a racial gap in CEO compensation?," Journal of Corporate Finance, Elsevier, vol. 69(C).
    4. Sonia Yasin & Muhammad Irfan & Muhammad Shaukat Malik & Fasiha Nargis, 2022. "The Relationship between Executive Remuneration and Organizations Efficiency," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(3), pages 59-70, December.
    5. Joura, Essam & Xiao, Qin & Ullah, Subhan, 2021. "The impact of Say-on-Pay votes on firms' strategic policies: Insights from the Anglo-Saxon economy," International Review of Financial Analysis, Elsevier, vol. 73(C).
    6. Blank, D. Brian, 2019. "Executive Incentives, Import Restrictions, and Competition: Empirical Analysis of Antidumping and Countervailing Duty Orders," Working Papers 09889, George Mason University, Mercatus Center.
    7. Harvey, Charles & Maclean, Mairi & Price, Michael, 2020. "Executive remuneration and the limits of disclosure as an instrument of corporate governance," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 69(C).
    8. Essam Joura & Qin Xiao & Subhan Ullah, 2023. "The moderating effects of CEO power and personal traits on say‐on‐pay effectiveness: Insights from the Anglo‐Saxon economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4055-4078, October.
    9. Kun Su & Haiyan Jiang & Gary Tian, 2020. "Government's Say‐on‐pay Policy and Corporate Risk‐taking: Evidence from China," Abacus, Accounting Foundation, University of Sydney, vol. 56(4), pages 561-601, December.
    10. Wonjae Chang & Michael Dambra & Bryce Schonberger & Inho Suk, 2023. "Does Sensationalism Affect Executive Compensation? Evidence from Pay Ratio Disclosure Reform," Journal of Accounting Research, Wiley Blackwell, vol. 61(1), pages 187-242, March.
    11. Patrick J. Ferguson & Matthew Pinnuck, 2022. "Superstar Productivity and Pay: Evidence from the Australian Football League," The Economic Record, The Economic Society of Australia, vol. 98(321), pages 166-190, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:now:jnllfa:108.00000030. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lucy Wiseman (email available below). General contact details of provider: http://www.nowpublishers.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.