Publication Date

Spring 2000

Journal

Wake Forest Law Review

Abstract

This Article takes a close look at the potential misalignment of interests created by managers' traditional discretion over the timing and content of corporate disclosures and managers' new incentives, created by performance-based compensation, to utilize that discretion to maximize the value of their own compensation. It examines recent studies that strongly suggest that CEOs are manipulating disclosure to increase their own compensation. It then considers the various ways such manipulation can occur, concluding that all but the most egregious forms of disclosure manipulation by management are either legal or effectively insulated from legal redress. The Article then examines the rationales for giving management such broad discretion over disclosure timing. It argues that managerial discretion is necessary to ameliorate various uncertainties and conflicts created by the broad disclosure obligations of the securities laws and that, when managers utilize that discretion for their personal ends, they are imposing new agency costs on the corporation and its shareholders. It considers whether such agency costs can be reduced by more effective board monitoring, changes in the structure of performance-based compensation, or more effective enforcement of the securities laws, concluding that each has a role to play but that none is likely to be completely or even substantially effective.

Volume

35

Issue

1

First Page

83

Last Page

122

Publisher

Wake Forest University School of Law

Disciplines

Banking and Finance Law | Labor and Employment Law | Law

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