Management Compensation Plans: Panacea or Placebo?
Author(s)
Jacobs, Michael
Abstract
The escalating compensation of top corporate executives has been one of the most dramatic and visible sources of new individual wealth in recent years. Huge payments to CEOs often result from performance-based compensation plans, which are said to create incentives for managers to maximize shareholder returns, thereby harmonizing the interests of managers and investors. This chapter examines the practice of performance-based management compensation plans and explains why those plans rarely provide the intended incentives. The author is a business executive who served in the Treasury Department under the Bush administration; his book presents a broad critique of institutional factors that promote an excessively short-run orientation in corporate decision-making.
