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The Governance of Executive Remuneration during the Crisis: Evidence from Italy

In: Bank Strategy, Governance and Ratings

Author

Listed:
  • Marcello Bianchi
  • Angela Ciavarella
  • Valerio Novembre
  • Rossella Signoretti

Abstract

Executive remuneration has long been considered a key variable of corporate governance in that it can allow a better alignment of the management’s interests with those of the shareholders. In a context of asymmetric information, the optimal contracting theory suggests that an efficient remuneration contract, namely one with a fine-tuned mix of fixed and variable components, might effectively overcome agency problems (Jensen and Meckling, 1976; Fama and Jensen, 1983; Jensen and Murphy, 1990). However, recent scandals have indicated that when it comes to the real world these theoretical predictions are not always grounded. Actually, the competing rent extraction view has shown a strong explanatory power by hypothesizing that managers are able to influence the pay process for their own benefit (La Porta et al., 1999; Bebchuk et al., 2002; Bebchuk and Fried, 2006).

Suggested Citation

  • Marcello Bianchi & Angela Ciavarella & Valerio Novembre & Rossella Signoretti, 2011. "The Governance of Executive Remuneration during the Crisis: Evidence from Italy," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Philip Molyneux (ed.), Bank Strategy, Governance and Ratings, chapter 4, pages 72-93, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-0-230-31386-6_5
    DOI: 10.1057/9780230313866_5
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