It is widely believed that the ideal board in corporations is composed almost entirely of independent (outside) directors. In contrast, this paper shows that some lack of board independence can be in the interest of shareholders. This follows because a lack of board independence serves as a...

This paper analyzes the optimal design of stock option vesting conditions when the CEO faces a risk of being replaced at an interim date. First, I show that long vesting terms do not necessarily discourage but in fact can encourage short-termism. Second, the model demonstrates that the optimal...

Corporations have been criticized for providing executives with excessive incentives to focus on short-term performance. This paper shows that investment in short-term projects has beneficial effects in that it provides early feedback about CEO talent, which leads to more efficient CEO...

One of the primary roles of corporate boards is to control the processes by which top executives are assessed and if necessary replaced. CEO turnover cannot be viewed in isolation because it affects the behavior of the involved players and hence interacts with other organizational goals. This...