Joseph Stiglitz, Nobel Laureate in Economics, and author of The Roaring Nineties
[This] work will shape debates on executive compensation and corporate governance for years to come.
John C. Bogle, Founder, The Vanguard Group
This is a book that must be read...by any citizen who cares about our society.
Oliver Hart, Harvard University
Nobody who reads this book will feel quite the same about Corporate America again.
Review
Lucian Bebchuk and Jesse Fried have brought to light one of the most important issues facing our society today. I agree enthusiastically and almost completely with their analysis of the problem.
John Kenneth Galbraith
This literate and learned book is for all who wish to learn the facts and consequences [of management’s control].
Arthur Levitt, Jr., former SEC chairman
I agree enthusiastically and almost completely with [Bebchuk and Fried's] analysis of the problem."
Ben White, The Washington Post, December 5, 2004
Those looking for a substantive deconstruction of the system—and a few ideas to fix it—could hardly do better.
Book Description
The company is under-performing, its share price is trailing, and the CEO gets�a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers� influence over their own pay�and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm�s length with the executives they are meant to oversee. They give a richly detailed account of how pay practices�from option plans to retirement benefits�have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives� unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers� incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Excerpt. © Reprinted by permission. All rights reserved.
http://www.hup.harvard.edu/pdf/BEBPAY.pdf
Pay without Performance: The Unfulfilled Promise of Executive Compensation FROM THE PUBLISHER
Pay without Performance presents a disconcerting portrait of executives' power to influence their own pay - and of the structural defects in corporate governance that give them this power. As this book demonstrates, boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. Lucian Bebchuk and Jesse Fried give a richly detailed account of how pay practices - from option plans to retirement benefits - have decoupled compensation from performance and camouflaged both the amount and the performance-insensitivity of pay. They show that flaws in pay arrangements and the pay-setting process have been widespread and systemic. These problems have hurt shareholders both by increasing pay levels and, even more important, by leading to practices that dilute and distort managers' incentives.
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