This paper analyzes stock option awards to CEOs of 792 U.S. public corporations between 1984 and 1991. Using a Black-Scholes approach, I test whether stock options' performance incentives have significant associations with explanatory variables related to agency cost reduction. Further tests examine whether the mix of compensation between stock options and cash pay can be explained by corporate liquidity, tax status, or earnings management. Results indicate that few agency or financial contracting theories have explanatory power for patterns of CEO stock option awards.

We study benefits received by target chief executive officers (CEOs) in completed mergers and acquisitions. Certain target CEOs negotiate large cash payments in the form of special bonuses or increased golden parachutes. These negotiated cash payments are positively associated with the CEO's prior excess compensation and negatively associated with the likelihood that the CEO becomes an executive of the acquiring company. Regression estimates suggest that target shareholders receive lower acquisition premia in transactions involving extraordinary personal treatment of the CEO. Target CEOs experience very high turnover rates both at the time of acquisition and, for those who remain employed, for several years thereafter.

This paper analyzes the timing of CEO stock option awards, as a method of investigating corporate managers’ influence over the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, I find that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies’ quarterly earnings announcements are consistent with an interpretation that CEOs received stock option awards shortly before favorable corporate news. I evaluate and reject several alternative explanations of the results, including insider trading and the manipulation of news announcement dates.

ABSTRACT I study incentives received by outside directors in Fortune 500 firms from compensation, replacement, and the opportunity to obtain other directorships. Previous research has only shown these relations to apply under limited circumstances such as financial distress. Together these incentive mechanisms provide directors with wealth increases of approximately 11 cents per $1,000 rise in firm value. Although smaller than the performance sensitivities of CEOs, outside directors' incentives imply a change in wealth of about $285,000 for a 1 standard deviation ( SD ) change in typical firm performance. Cross‐sectional patterns of director equity awards conform to agency and financial theories.

ABSTRACT This article analyzes the timing of CEO stock option awards, as a method of investigating corporate managers' influence over the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, I find that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies' quarterly earnings announcements are consistent with an interpretation that CEOs receive stock option awards shortly before favorable corporate news. I evaluate and reject several alternative explanations of the results, including insider trading and the manipulation of news announcement dates.

Pensions and deferred compensation represent substantial components of CEO incentives. We study stockholder and bondholder reactions to companies' initial reports of CEOs' inside debt positions following a 2007 SEC disclosure reform. We find that bond prices rise, equity prices fall, and the volatility of both securities drops for firms whose CEOs have sizeable defined benefit pensions or deferred compensation. Similar changes occur for credit default swap spreads and exchange-traded options. The results indicate a reduction in firm risk, a transfer of value from equity toward debt, and an overall destruction of enterprise value when CEOs' inside debt holdings are large.

We investigate the impact of stock‐based compensation on managerial ownership. We find that equity compensation succeeds in increasing incentives of lower‐ownership managers, but higher‐ownership managers negate much of its impact by selling previously owned shares. When executives exercise options to acquire stock, nearly all of the shares are sold. Our results illuminate dynamic aspects of managerial ownership arising from divergent goals of boards of directors, who use equity compensation for incentives, and managers, who respond by selling shares for diversification. The findings cast doubt on the frequent and important theoretical assumption that managers cannot hedge the risks of these awards.

We study whether CEO involvement in the selection of new directors influences the nature of appointments to the board. When the CEO serves on the nominating committee or no nominating committee exists, firms appoint fewer independent outside directors and more gray outsiders with conflicts of interest. Stock price reactions to independent director appointments are significantly lower when the CEO is involved in director selection. Our evidence may illuminate a mechanism used by CEOs to reduce pressure from active monitoring, and we find a recent trend of companies removing CEOs from involvement in director selection.

The authors study associations between managerial entrenchment and firms' capital structures, with results generally suggesting that entrenched CEOs seek to avoid debt. In a cross-sectional analysis, they find that leverage levels are lower when CEOs do not face pressure from either ownership and compensation incentives or active monitoring. In an analysis of leverage changes, the authors find that leverage increases in the aftermath of entrenchment-reducing shocks to managerial security, including unsuccessful tender offers, involuntary CEO replacements, and the addition to the board of major stockholders.

We study the strategic scheduling of annual shareholder meetings. When companies move their annual meetings a great distance from headquarters, they tend to experience pronounced stock market underperformance in the six months after the meeting and announce earnings below expectations over the subsequent year. Companies appear to schedule meetings in remote locations when the managers have private, adverse information about future performance and wish to discourage scrutiny by shareholders, analysts, and the media. However, shareholders do not decode this signal, since the disclosure of meeting locations leads to little immediate stock price reaction. We find that voter participation drops when meetings are held at unusual hours, even though most voting is done electronically during a period of weeks before the meeting convenes.