In this paper we attempt to gain a deeper understanding of the firm’s ability to integrate stakeholder insights into the process of organisational innovation within the context of sustainable development. Given the early stage of empirical research on the topic, we used an exploratory case study of two Spanish companies that have successfully learned from stakeholder dialogue and have generated...

This paper aims to understand how firms’ asymmetric risk environment affects the CEO compensation structure. I investigate firm’s downside and upside potential differentially affect choice between cash equity stock options restricted compensation. First, show that, as (upside potential) increases, boards grant more (more compensation) less (less compensation). Second, that proportion of option ...

This paper investigates the role of non-financial performance measures in executive compensation. Using a sample of airline firms we document that passenger load factor, an important non-financial measure for firms in this industry, is positively associated with CEO cash compensation. This association is significant after controlling for traditional accounting performance measures (return on as...

This paper considers the joint optimal design of CEOs’ on-the-job compensation and severance pay in a general optimal contracting framework. We obtain a novel argument for high-powered, non-linear CEO compensation such as bonus schemes and option grants that is different from existing arguments based on moral hazard and risk taking. Based on this argument, the CEO’s optimal on-the-job compensat...

We examine the empirical relationship between executive compensation and credit risk. For each of the three major components of CEO compensation – salary, bonus, and stock option awards – we derive estimates of “unexplained” compensation as pay that deviates substantially from expected pay based on firm size, past performance, and other variables. We then relate these measures of unexplained co...

We integrate an agency problem into search theory to study executive compensation in a market equilibrium. A CEO can choose to stay or quit and search after privately observing an idiosyncratic shock to the firm. The market equilibrium endogenizes CEOs’ and firms’ outside options and captures contracting externalities. We show that the optimal pay-to-performance ratio is less than one even when...

I analyze the relationship between firm size and the extent to which executive compensation depends on the wealth of the firm’s shareholders. I use a simple agency model to motivate an econometric model of this relationship. Estimating this model on chief executive officer (CEO) compensation data using nonlinear least squares, I determine that pay–performance sensitivity (as defined by Jensen a...