Does One Hand Wash the Other? Testing the Managerial Power and Optimal Contracting Theories of Executive Compensation

Dorff, Michael B.
January 2005
Journal of Corporation Law;Winter2005, Vol. 30 Issue 2, p255
Academic Journal
Argues that corporate governance reform should focus on minimizing managerial power over directors through mechanisms such as truly competitive elections for directors. Use of an experimental model of the executive compensation process; Argument of the Optimal Contracting Hypothesis that boards of directors, functioning as public shareholders' loyal agents, bargain at arms-length for the services of chief executive officers and other senior members of the management team; Argument of the Managerial Power Hypothesis that boards of directors do not bargain at arms-length with managers.


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