{'fraction_non_alphanumeric': 0.02258201959948871, 'fraction_numerical': 0.0012782275244993609, 'mean_word_length': 5.8654970760233915, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Executive Compensation: If There's a Problem, What's the Remedy? The Case for "Compensation Discussion and Analysis"

ABSTRACT High levels of executive compensation have triggered an intense debate over whether compensation results primarily from competitive pressures in the market for managerial services or from managerial overreaching. Professors Lucian Bebchuk and Jesse Fried have advanced the debate with their recent book, Pay Without Performance: The Unfulfilled Promise of Executive Compensation, which forcefully argues that current compensation levels are best explained by managerial rent-seeking, not by arm's-length bargaining designed to create the optimum pay and performance nexus. This paper expresses three sorts of reservations with their analysis and advances its own proposals. First, enhancing shareholder welfare is not, as a positive or normative matter, a sufficient framework for understanding the controversy or devising a remedy. Second, many of the compensation practices identified by Bebchuk and Fried as veritable "smoking guns" of managerial power may have benign explanations. Third, in improving the corporate governance apparatus in the executive compensation area, the better remedy is not a wholesale expansion of shareholder power, but a tailored series of measures designed to bolster the independence of the compensation committee. Most important, the SEC should require proxy disclosure of a "Compensation Discussion and Analysis" statement (CDA (2) in contrast, the lack of shareholder influence in the director selection process, which could otherwise buttress director independence; (3) interlocking membership among boards of directors that lead to back-scratching among business elite who share a mutual self-interest in escalating levels of executive compensation; and (4) the use of compensation consultants with disabling conflicts of interest, in particular, provision to the firm of a wide range of compensation consulting services. In reflecting upon the Bebchuk and Fried analysis, sometimes critically, I want to be clear about the importance of the book's contribution in comprehensively setting forth the different elements of compensation packages and in raising many serious questions about compensation practices and the corporate governance institutions that have countenanced them. …