Optimal Corporate Governance Structures
AbstractThis 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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Bibliographic InfoPaper provided by Centro de Estudios Monetarios Y Financieros- in its series Papers with number 9907.
Length: 39 pages
Date of creation: 1999
Date of revision:
Contact details of provider:
Postal: Centro de Estudios Monetarios Y Financieros. Casado del Alisal, 5-28014 Madrid, Spain.
Web page: http://www.cemfi.es/
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INVESTMENTS ; BUSINESS ORGANIZATION ; BUSINESS FINANCING;
Other versions of this item:
- Almazan, Andres & Suarez, Javier, 2000. "Optimal Corporate Governance Structures," CEPR Discussion Papers 2391, C.E.P.R. Discussion Papers.
- Andres Almazan & Javier Suarez, 2000. "Optimal Corporate Governance Structures," Econometric Society World Congress 2000 Contributed Papers 1112, Econometric Society.
- 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: Theory
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- 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.
- 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.
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