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How Much Sunlight Does it Take to Disinfect a Boardroom? A Short History of Executive Compensation Regulation

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Author Info
Ian Dew-Becker ()

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Abstract

This paper reviews the history of executive compensation disclosure and other government policies affecting CEO pay, and as well surveys the literature on the effects of these policies. Disclosure has increased nearly uniformly since 1933. A number of other regulations, including special taxes on CEO pay and rules regarding votes on some pay packages have also been introduced, particularly in the last 20 years. However, there is little solid evidence that any of these policies have had any substantial impact on pay. Policy changes have likely helped drive the move towards more use of stock options, but there is no conclusive evidence on how policy has otherwise affected the level or composition of pay. I also review evidence from overseas on “Say on Pay,” recently proposed in the US, which would allow nonbinding shareholder votes on CEO compensation. The experiences of other countries have been positive, with tighter linkages between pay and performance and improved communication with investors. Mandatory say on pay would be beneficial in the US.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2379.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2379

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Find related papers by JEL classification:
J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
K22 - Law and Economics - - Regulation and Business Law - - - Corporation and Securities Law

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  1. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March. [Downloadable!] (restricted)
  2. Rafael Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2006. "What Works in Securities Laws?," Journal of Finance, American Finance Association, vol. 61(1), pages 1-32, 02. [Downloadable!] (restricted)
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  3. Dew-Becker, Ian & Gordon, Robert J, 2005. "Where did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income," CEPR Discussion Papers 5419, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Vafeas, Nikos & Afxentiou, Zaharoulla, 1998. "The association between the SEC's 1992 compensation disclosure rule and executive compensation policy changes," Journal of Accounting and Public Policy, Elsevier, vol. 17(1), pages 27-54. [Downloadable!] (restricted)
  5. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 1-39, February. [Downloadable!] (restricted)
  6. Lo, Kin, 2003. "Economic consequences of regulated changes in disclosure: the case of executive compensation," Journal of Accounting and Economics, Elsevier, vol. 35(3), pages 285-314, August. [Downloadable!] (restricted)
  7. Jensen, Michael C, 1993. " The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Finance, American Finance Association, vol. 48(3), pages 831-80, July. [Downloadable!] (restricted)
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  8. Ian Dew-Becker & Robert J. Gordon, 2005. "Where Did Productivity Growth Go? Inflation Dynamics and the Distribution of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2005-2), pages 67-150. [Downloadable!]
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