Executive compensation: : A model of disclosure choice

摘要: Recent public policy debates have led to increased calls for full transparency of executive compensation. However, in practice, many firms are reluctant disclose the details how they link compensation performance. One possible reason lack disclosure is that managers use their power hide plan order disguise opportunistic rent extraction. If this secrecy, then designed force provide unlikely be resisted by shareholders. another explanation less than some degree secrecy about may interest company and its correct, moves increase met counter protect shareholders from such policies. In paper we investigate if arrangements always optimal We develop a model where remuneration solves moral hazard problem. which problem affects depends on hidden information, so scheme will typically reveal can harmful The derives, therefore, scheme. find better off pre-committing not whenever possible. Executive directors shown too absence schemes. An argument mandating it provides information but our analysis demonstrates does necessarily achieve objective. results suggest shareholders, being disclosures cannot made selectively also strategic opponents. This case board committee includes enough independent directors. Whether or non-disclosure however an empirical matter involving trade-off between proprietary costs associated with potential collusion non-executive non-disclosure.