CEOs' pay-performance sensitivity (delta) is higher in the first year after being hired than in the following years. I explain this finding with reference to CEO prior uncertainty: due to information asymmetry and/or uncertainty about the quality of the match between a CEO and a firm, first-year...

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...