This paper investigates whether and how social-psychological mechanisms, namely reciprocity, demographic similarity, and similar experiences, affect CEO compensation packages with respect to the levels of total, fixed, and short- and mid-term compensation and the variable proportion of the...

In the German two-tiered system of corporate governance, it is not uncommon for chief executive officers (CEOs) to become the chairman of the supervisory board of the same company upon retirement. This practice has been discussed controversially because of potential conflicts of interest. As a...

We study changes in the design of CEO contracts when firms transition from being public with dispersed ownership to being private with strong principals in the form of private equity sponsors. These principals redesign many, but far from all, contract features. There is no evidence that they...

In the German two-tiered system of corporate governance, it is common practice for chief executive officers (CEOs) to become the chairman of the supervisory board of the same company upon retirement. As members of the supervisory board, they are involved in setting the pay for their successors...

I build a model of optimal managerial compensation where managers each have a privately observed propensity to manipulate short-term stock prices. It is shown that this informational asymmetry reverses some of the conventional wisdom about the relationship between reliance on short-term pay and...

This paper investigates whether observed executive compensation contracts are designed to provide risk-taking incentives in addition to effort incentives. We develop a stylized principal-agent model that captures the interdependence between firm risk and managerial incentives. We calibrate the...

Since August 2009, German legislation allows for voluntary Say on Pay Votes (SoPV) during Annual General Meetings (AGMs). We examine 1,169 AGMs of all German listed firms with more than 10,000 agenda items over the period 2010-2013 to identify (1) determinants and approval rates of voluntary...

This paper proposes a new regulatory approach that implements capital requirements contingent on managerial compensation. We argue that excessive risk taking in the financial sector originates from the shareholder moral hazard created by government guarantees rather than from corporate...

In the German two-tiered system of corporate governance, it is not uncommon for chief executive officers (CEOs) to become the chairman of the supervisory board of the same company upon retirement. This practice has been discussed controversially because of potential conflicts of interest. As a...

This Closer Look illustrates the relation between executive compensation and organizational risk through the context of the financial crisis of 2008. We demonstrate that the incentives that bankers had to increase firm risk not only increased but increased substantially in the years preceding...