In Closer Look, we highlight significant “holes” in our knowledge of corporate governance. These are central issues where insufficient or inadequate study has left us unable to answer basic questions, and where key assumptions relied upon by experts have not been verified or validated. While...

Americans tend to admire powerful leaders. Powerful leaders are seen as exerting influence over their organizations and shaping outcomes around them. CEO power can be exercised across a wide spectrum of decisions, including those regarding corporate strategy, operations, acquisitions,...

Understanding CEO compensation plans is a continuing challenge for directors and investors. The disclosure of these plans is dictated by SEC rules that rely heavily on the “fair value” of awards at the time they are granted. The problem with these numbers is that they are static and do not...

Institutional investors pay considerable attention to the quality of a company's governance. Unfortunately, it is difficult for outside observers to reliably gauge governance quality. Oftentimes, poor governance manifests itself only after decisions have been made and their outcomes known. We...

The litmus test for an effective compensation program is whether it provides “pay for performance.” While the concept of pay for performance is simple, its implementation is not. In particular, boards must consider not only whether a compensation plan encourages executives to pursue...

Recent years have seen a reemergence of the practice of awarding “mega grants” to CEOs. Mega grants are large, one-time equity awards granted in lieu of or in addition to annual awards with the intended purpose of providing significant incentive to the CEO to achieve long-term targets. The...

Executive compensation has become one of the most contentious topics in corporate governance. However, public perception about executive pay suffers from many misconceptions. These include the notions that:1. The ratio of CEO-to-average-worker pay is a useful statistic:2. Compensation...

Currently, there is much debate about the role that non-investor stakeholder interests play in the governance of public companies. Critics argue that greater attention should be paid to the interest of stakeholders and that by investing in initiatives and programs to promote their interests,...

Companies in the United States are staying private longer, and this trend has important implications for companies and their employees. Employees holding equity awards in private companies are restricted from monetizing an illiquid asset that they might need to support their living expenses....

CEO activism — the practice of CEOs taking public positions on environmental, social, and political issues not directly related to their business — has become a hotly debated topic in corporate governance. To better understand the implications of CEO activism, we examine its prevalence, the...