In the bank-borrower setting, a firm's existing lender may exploit its positional advantage to extract rents from the firm in subsequent financings. Analogously, a startup's existing venture capital investors (VCs) may dilute the founder through a follow-on financing from these same VCs (an...

This paper analyzes an important form of "stealth compensation" provided to managers of public companies. We show how boards have been able to camouflage large amount of executive compensation through the use of retirement benefits and payments. Our study highlights the significant role that...

In their recent book, "Pay Without Performance: The Unfulfilled Promise of Executive Compensation", the authors of this article provided a comprehensive critique of U.S. executive pay practices and the corporate governance processes that produce them, and then offered a number of proposals for...

This paper provides an overview of the main theoretical elements and empirical underpinnings of a "managerial power" approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between...

Venture capitalists investing in U.S. startups typically receive preferred stock and extensive control rights. Various explanations for each of these arrangements have been offered. However, scholars have failed to notice that these arrangements, when combined, often lead to a highly unusual...

Corporate managers generally owe a fiduciary duty exclusively to shareholders --a duty interpreted as requiring the managers to maximize shareholder value. When the firm is solvent, the duty to maximize shareholder value tends to give managers an incentive to act efficiently that is, in a way...

Academics studying public firms' choice of governance arrangements have largely assumed that stock prices accurately reflect the effect of these arrange¬ments on firm value. As a result, firms going public generally have an incentive to seek arrangements that maximize shareholder value, and...

Rule 10b 5 of the Securities Exchange Act of 1934, the primary instrument for regulating insider trading, prohibits insiders from trading on material inside information. However, Rule 10b 5 does not prohibit insiders from using inside information to abstain from trading. For example, a CEO who...

Companies, investors, and regulators around the world are now seeking to tie executives' payoffs to long-term results and avoid rewarding executives for short-term gains. Focusing on equity-based compensation, the primary component of top executives' pay, the authors analyze how such...

This paper provides an overview of the main theoretical elements and empirical underpinnings of a managerial power' approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between managers...