Article2001

Director Stock Compensation: An Invitation to a Conspicuous Conflict of Interests?

58 citations0/0 files storedBusiness Ethics Quarterly

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Corporate Finance and Governance Corporate Governance and Law Corporate Governance and Financial Management

Abstract

Abstract: While many aspects of stock and option based compensation for corporate officers remain controversial, we suggest that the growing trend for similar practices in favor of boards of directors will prove to be even more contentious. High-ranking corporate managers do not set their own salaries nor authorize their own stock options. By contrast, boards of directors do, in fact, set their own compensation packages. Other potential conflicts of interest include setting option performance targets, stock buybacks, stock option resets and reloads, consolidations (mergers and acquisitions), and service on multiple boards. As trust is the most valuable commodity in a capitalist society, we suggest that these potential conflicts of interest and related outcomes may ultimately serve to erode any anticipated benefits of director stock compensation.

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References

1997A Survey of Corporate Governance 1989Agency Theory: An Assessment and Review 1980Agency Problems and the Theory of the Firm 1995The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications 1995A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance 1997TOWARD A STEWARDSHIP THEORY OF MANAGEMENT 1994The Politics of Stakeholder Theory: Some Future Directions 1998Meta-analytic reviews of board composition, leadership structure, and financial performance

Cited by

2011The Collapse of a European Bank in the Financial Crisis: An Analysis from Stakeholder and Ethical Perspectives 2011Beyond Agency Theory, a Post‐crisis View of Corporate Law 2010New Directions in Corporate Governance and Finance: Implications for Business Ethics Research 2007Boards of Directors’ Self Interest: Expanding for Pay in Corporate Acquisitions?2014Institutional directors and board compensation: Spanish evidence 2007Moderators of the Relationship Between Director Stock‐Based Compensation and Firm Performance

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