This paper demonstrates that differences in managerial ownership data cannot explain contradictory empirical evidence on the relation between equity ownership and the entrenchment of managers. Three commonly used sources of managerial equity ownership data are described and contrasted. The Value Line Investment Survey is shown to be a relatively low-cost substitute for the data on beneficial ownership by officers and directors found in corporate proxy statements.

Management compensation is often categorized as either sensitive or insensitive to firm performance. This one-dimensional treatment ignores the variation in the types and terms of compensation contracts. Through a cross-sectional examination of share-holder-authorized compensation arrangements, this paper demonstrates that the terms of stock option and restricted stock plans, and the flexibility afforded the board of directions in negotiating with managers, vary systematically with the characteristics of the assets being managed. This variation in compensation contracting challenges theorists to incorporate the richness of management contracts into models of incentive pay.

Deregulation provides a natural experiment for examining how governance adapts to structural changes in the business environment. We investigate the evolution of governance structure, characterized by ownership concentration, compensation policy, and board composition, in the U.S. airline industry during a 22-year period surrounding the Airline Deregulation Act of 1978. Consistent with theory, we find that after deregulation (i) equity ownership is more concentrated, (ii) CEO pay increases, (iii) stock option grants to CEOs increase, and (iv) board size decreases. Airlines’ governance structures gravitate toward the system of governance mechanisms used by unregulated firms. The adaptation process is gradual, however, suggesting that it is costly to alter organizational capital. We also present evidence on the relation between governance structure and firm survival.