Optimal Corporate Governance Structures

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Optimal Corporate Governance Structures

Author Info

Almazan, A.
Suarez, J.

Additional information is available for the following registered author(s):

Javier Suarez

Abstract

This paper explores how motivating an incumbent CEO to make investments that improve the effectiveness of the firm's organization interacts with the replacement policy of the board of directors. We characterize the optimal compensation package (including severance pay) under governance structures that differ in the power that the incumbent CEO has on the board of directors. We explain why yielding the incumbent CEO effective control of the board (entrenchment) can be desirable and offer predictions on the correlation between the elements of his compensation package and the degree of board independence.

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Publisher Info
Paper provided by Centro de Estudios Monetarios Y Financieros- in its series Papers with number 9907.

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Length: 39 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:cemfdt:9907

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Paper
- Andres Almazan & Javier Suarez, 2000. "Optimal Corporate Governance Structures," Econometric Society World Congress 2000 Contributed Papers 1112, Econometric Society. [Downloadable!]
- Almazan, Andres & Suarez, Javier, 2000. "Optimal Corporate Governance Structures," CEPR Discussion Papers 2391, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
G30 - Financial Economics - - Corporate Finance and Governance - - - General
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Benjamin E. Hermalin & Michael S. Weisbach, 2001. "Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature," NBER Working Papers 8161, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 7-26. [Downloadable!]

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