Anabtawi, Iman
October 2005
Emory Law Journal;Fall2005, Vol. 54 Issue 4, p1557
Academic Journal
The article discusses the shortcomings of the optimal contracting model of executive compensation in the U.S. In the optimal contracting model of executive compensation, boards of directors of corporations negotiate compensation arrangements with executives in a way that maximizes shareholder values. Specifically, the model predicts a meaningful relationship between executive pay and performance. However, studies have not shown a convincing relationship between executive pay and performance. The managerial power theory of executive compensation is proposed to explain executive pay without performance.


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