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From Shareholder Value to CEO Power: the Paradox of the 1990s

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  • Robert Boyer

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

Why did CEO remuneration explode during the 1990s and persist at high levels, even after the Internet bubble burst? This article surveys the alternative explanations that have been given of this paradox, mainly by various economic theories with some extension to political science, business administration, social psychology, moral philosophy and network analysis. It is argued that the diffusion of stock options and financial market-related incentives, supposed to discipline managers, have entitled them to convert their intrinsic power into remuneration and wealth, both at micro and macro level. This is the outcome of a de facto alliance of executives with financiers, who have exploited the long-run erosion of wage earners' bargaining power. The article also discusses the possible reforms that could reduce the probability and the adverse consequences of CEO and top-manager opportunism: reputation, business ethic, legal sanctions, public auditing of companies, or a shift from a shareholder to a stakeholder conception.

Suggested Citation

  • Robert Boyer, 2005. "From Shareholder Value to CEO Power: the Paradox of the 1990s," Post-Print halshs-00754109, HAL.
    • Handle: RePEc:hal:journl:halshs-00754109
    DOI: 10.1179/102452905X38623
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    Citations

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    Cited by:

    1. Thibault Darcillon, 2012. "Do Interactions between Finance and Labor Market Institutions Affect Wage Distribution?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00768908, HAL.
    2. Mustafa Erdem Sakinç, 2017. "Share Repurchases in Europe A Value Extraction Analysis," CEPN Working Papers hal-03987909, HAL.
    3. Mustafa Erdem Sakinç, 2017. "Share Repurchases in Europe A Value Extraction Analysis," Working Papers hal-03987909, HAL.
    4. Gimet, Céline & Lagoarde-Segot, Thomas & Reyes-Ortiz, Luis, 2019. "Financialization and the macroeconomy. Theory and empirical evidence," Economic Modelling, Elsevier, vol. 81(C), pages 89-110.
    5. Tiago Cardao-Pito, 2017. "Classes in Maximizing Shareholders’ Wealth: Irving Fisher’s Theory of the Economic Organization in Corporate Financial Economics Textbooks," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 11(4), December.
    6. repec:ilo:ilowps:484122 is not listed on IDEAS
    7. Froud, Julie & Johal, Sukhdev & Leaver, Adam & Williams, Karel, 2014. "Financialization across the Pacific: Manufacturing cost ratios, supply chains and power," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 25(1), pages 46-57.
    8. Wiid, Ria & Pitt, Leyland & Mills, Adam J., 2012. "Every story tells a picture: Lessons from cartoons on corporate governance," Business Horizons, Elsevier, vol. 55(6), pages 543-550.
    9. Callaghan, Helen, 2013. "Who cares about financialization? Explaining the decline in political salience of active markets for corporate control," MPIfG Discussion Paper 13/4, Max Planck Institute for the Study of Societies.
    10. Gerhard Schnyder, 2012. "Measuring Corporate Governance: Lessons from the 'Bundles Approach'," Working Papers wp438, Centre for Business Research, University of Cambridge.
    11. Giovanni Dosi & Valérie Revest & Alessandro Sapio, 2016. "Financial regimes, financialization patterns and industrial performances : preliminary remarks," Post-Print halshs-01418040, HAL.
    12. Grumbach Jacob M., 2015. "Polluting industries as climate protagonists: cap and trade and the problem of business preferences," Business and Politics, De Gruyter, vol. 17(4), pages 633-659, December.
    13. Dünhaupt, Petra., 2013. "Determinants of functional income distribution : theory and empirical evidence," ILO Working Papers 994841223402676, International Labour Organization.
    14. Batiz-Lazo, Bernardo & Martínez-Rodríguez, Susana, 2022. "Gender and the financialization of Spanish retail banking, 1949-1970," MPRA Paper 114629, University Library of Munich, Germany.

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