executive compensation

When a publicly traded company meets a pay-for-performance target, it may be lauded by Wall Street investors, however, new research from Washington University in St. Louis shows it can also be cause for concern.

World leaders from the Group of 20 industrialized and developing nations gather in Pittsburgh this week and the global banking system is on the top of the agenda. Topics for discussion will include how to strengthen banks and help prevent financial crises like the one that roiled global markets a year ago. U.S. and European regulations of executive compensation at banks will also be scrutinized at the summit. Olin Business School professor and banking expert Stuart Greenbaum’s advice: proceed with caution.

Investors are reluctant to devote resources to female-run companies, according to research from two professors at the Olin School of Business. They found that potential backers are likely to invest 300 percent more in male-run firms than in firms run by a woman; and they would pay a female CEO 86 percent of the salary they’d pay a male CEO.

Executive pay is sometimes appropriate, often not.In a perfect business world, corporate governance and decision-making would follow sound and rational processes. And, indeed, Professor Todd Milbourn has discovered that, at times, executives are compensated appropriately and appropriate decisions are taken. This finding is from what he calls the “bright side” of his research. But, the real world can also serve up Disneys, Enrons, and WorldComs. Not all mismanagement, however, makes the front pages or drives companies into bankruptcy. More commonly it goes on unnoticed or as accepted practice, says Milbourn, associate professor of finance at the Olin School of Business at Washington University in St. Louis. His collaborative research also reveals a “dark side,” where companies reward chief executive officers simply for being lucky and where “yes men” often rule.

Business experts from all over the world will come to the Olin School of Business at Washington University to participate in a three-day conference on corporate governance Nov. 11 to 13. “Key Issues in Corporate Governance,” co-sponsored by the Olin School, the Center for Research in Economics and Strategy (CRES), and the Journal of Financial Intermediation, will be held at the Charles F. Knight Executive Education Center. The conference will feature two days of academic presentations and a third day devoted to panel discussions among senior corporate executives, policymakers and academics. Topics include financial markets and corporate governance regulation in the United States and similar issues in the European Union.

Troubling new evidence on corporate governance and CEO pay.In 1980, the average CEO was paid around 40 times as much as the average worker, but the multiple is now above 400 for the largest U.S. companies. With such increases in top executive pay, including New York Stock Exchange Chairman Richard Grasso’s $139.5 million retirement-pay package, an expert on executive compensation says that corporate governance practices should come under even greater scrutiny. Todd Milbourn, Ph.D., a professor of finance at the Olin School of Business at Washington University in St. Louis, has recently documented other troubling evidence with regard to the efficacy of corporate governance and CEO pay.