Publication Date

Fall 2007

Journal

NYU Journal of Law and Business

Abstract

The article challenges the arms-length bargaining model of CEO compensation, arguing that managerial power, social dynamics, and psychological factors significantly influence compensation decisions. It critiques both the managerial power thesis and the arms-length bargaining model, advocating for a more nuanced understanding that incorporates these non-economic influences. CEO compensation is not solely tied to performance but is shaped by boards' overconfidence, cognitive biases, and the cult of the CEO, leading to inefficient pay structures that often fail to align with shareholder interests.

Volume

4

Issue

1

First Page

89

Last Page

142

Publisher

NYU School of Law

Disciplines

Banking and Finance Law | Law | Securities Law

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