Disciplining and Screening Top Executives
2006-06-19
Research Paper
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Boards of directors face the twin task of disciplining and screening executives. To perform these tasks directors do not have detailed information about executives' behaviour, and only infrequently have information about the success or failure of initiated strategies, reorganizations, mergers etc. We analyse the nature of (implicit) retention contracts boards use to discipline and screen executives. Consistent with empirical observation, we find that executives may become overly active to show their credentials; that the link between bad performance and dismissal is weak; and that boards occasionally dismiss competent executives.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- G30 : Corporate Finance and Governance: General
- G34 : Mergers; Acquisitions; Restructuring; Corporate Governance
Automatically Extracted Terms
- executive
- board
- project
- option
- value
- implementation decision
- implementation
- selection option
- decision
- period
- selection
- contract
- retention
- retention contract
- agent
- result
- discipline
- increase
- parameter
- choice
