[企业管理]Week 2 Executive Compensation and Performance Measure.ppt

Grasso event cont’ Grasso was paid more than $76 million from 1999 through 2002 – more than 1/3 of the exchange’s net income in that period. NYSE is a non-for-profit institution similar to a regulatory agency. -- The chair of compensation committee then argued that Grasso was worth every dime, in part for getting the markets running after the Sep.11 terrorist attacks. Grasso event cont’ NYSE is a regulatory agency and it urges listed firms to improve corporate governance but it is revealed that NYSE itself has bad governance … -- the chairman of the compensation committee is Mr. Grasso’s long-time friend Grasso event cont’ Can a good performance or a performance improvement justify huge bonuses to a CEO? Rising tides lift all boats … -- lucky managers in bull markets all get good pay although they may not all exercise efforts to improve performance CEOs should be compensated for their efforts Need a benchmark to calculate relative performance -- the former HP CEO, Carly Fiorina, can collect full amount of cash award in a three-year period only if HP stock has outperformed at least half of the companies in the SP 500 at the end of the third year Executive Compensation and Performance Measure Week 2  Theoretical Background Conflicts in objects between shareholders and executives -- shareholders’ objective: maximize the value of their investments, and expect executives to exercise efforts to achieve their objective -- executives’ objective: maximize their own interest -- the actions executives take to maximize their own interest could destroy shareholder value Theoretical Background cont’ Different risk attitudes between shareholders and executives: executives are more risk-averse than shareholders -- shareholders invest financial capital, and can easily diversify their investments -- executives cannot diversify their human capital investment -- shareholders may prefer risky projects, while executives like safe projects