The U.S. equity compensation landscape continues to evolve. Recent innovations have improved the linkage between pay and firm-specific performance, but have added complexity. Against that backdrop, this Article urges reconsideration of the accounting rules for equity pay. Under current rules,...

Section 304 of the Sarbanes-Oxley Act (hereafter, SOX), commonly known as the clawback provision, entitles the SEC to sue the CEO and CFO in an attempt to recover their incentive compensation based on misstated financial reports. While a stream of literature investigates the effects of voluntary...

This paper develops a model of the causes and consequences of misreporting of corporate performance. Misreporting in our model covers all actions, whether legal or illegal, that enable managers of firms with low value to make statements that mimic those made by firms with high value. We show...

This paper shows that permitting executives to use inside information to time their option exercises can be part of an optimal pay arrangement. This is the case even though timing discretion enables executives to avoid losses by cashing out options on bad news, weakening the link between pay and...

We investigate incentives that led to the rash of restated financial statements at the end of the 1990s market bubble. We find the likelihood of a misstated financial statement increases greatly when the CEO has very sizable holdings of stock options quot;in-the-moneyquot; (i.e., stock price...

Evidence contrasting U.S. insider trades in high- and low-jeopardy periods and across firms at high and low risk for 10b-5 litigation indicates that insiders condition their trades on foreknowledge of price-relevant public disclosures, but avoid profitable trades when the jeopardy associated...

The paper examines the impact of executive compensation on private securities litigation. We find that incentive pay in the form of options increases the probability of securities class action litigation, holding constant a wide range of firm characteristics. We further document that there is...

Accounting for stock options and executive remuneration have been one of the most debated and controversial issues in accounting regulation and corporate governance. The purpose of this study was to analyse the impact of the mandatory adoption of IFRS 2 for accounting of stock options in Italian...

The paper discusses the economic impact of legal, corporate governance, tax, disclosure, and incentive issues arising from revelation of dating games with regard to executive option grant dates. It provides an estimate of the value loss incurred by shareholders of firms implicated in backdating...

Evidence contrasting U.S. insider trades in high- and low-jeopardy periods and across firms at high and low risk for 10b-5 litigation indicates that insiders condition their trades on foreknowledge of price-relevant public disclosures, but avoid profitable trades when the jeopardy associated...