While the fraction of independent directors has been widely used as a proxy for monitoring effectiveness of the board, there are no clear-cut measures that capture the advising effectiveness of the board. We develop and validate two new measures of board advising: (i) per-outside-director...

We argue that not all independent directors are equally effective in monitoring top management. Specifically, directors who are appointed by the CEO are likely to have stronger allegiance to the CEO and will be weaker monitors. To examine this hypothesis, we propose and empirically deploy two...

We provide evidence that firms reprice out-of-the-money executive stock options in order to realign managerial incentives. A sharp decline in stock price, by reducing the sensitivity of executive pay to firm performance (delta) and, in many cases, increasing sensitivity of executive pay to...

This paper provides empirical evidence of a strong relation between the structure of managerial compensation and both investment policy and debt policy. Higher sensitivity of CEO wealth to stock volatility (vega) is associated with riskier policy choices, including relatively more investment in...

In response to recent requests from academics and practitioners, this note addresses the data and program we use in our published articles on executive compensation and incentives. First, we detail our methodology for the calculation of delta (pay-performance sensitivity), vega (risk-taking...

This paper re-examines the relation between firm value and board structure. We find that complex firms, which have greater advising requirements than simple firms, have larger boards with more outside directors. The relation between Tobin's Q and board size is U-shaped which, at face value,...