Option backdating board interlocks

option backdating board interlocks-23

Option backdating board interlocks

We then test these implications and find results that generally support the predictions of our model. Prevailing models of capital markets capture a limited form of social influence and information transmission, in which the beliefs and behavior of an investor affect others only through market price, information transmission and processing is simple (without thoughts and feelings), and there is no l ..." Prevailing models of capital markets capture a limited form of social influence and information transmission, in which the beliefs and behavior of an investor affect others only through market price, information transmission and processing is simple (without thoughts and feelings), and there is no localization in the influence of an investor on others.

In reality, individuals often process verbal arguments obtained in conversation or from media presentations, and observe the behavior of others.

In this setting, observable compensation (salary) and hidden compensation (perks, pet projects, pensions, etc.) serve different roles for management and have different costs, and both are used in equilibrium.

We examine the relationship between observable and hidden compensation and other variable in a dynamic model, and derive a number of unique predictions regarding these two types of pay.

We consider a “managerial optimal” framework for top executive compensation, where top management sets their own compensation subject to limited entrenchment, instead of the conventional setting where such compensation is set by a board that maximizes firm value.

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