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Integrity, unprincipled agents and corporate governance reform

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  • Daniel Arce

Abstract

This study investigates the implications of integrity—interpreted as the alignment of one’s words and deeds—within the agency paradigm by explicitly allowing for unprincipled behavior (agent misconduct) in addition to conflicts of interest resulting from the separation of ownership and control. Under adverse selection, contracts that screen for agents who exhibit integrity characterize a previously unidentified symbiosis between the penalty for unprincipled behavior and high-powered incentive pay. The resulting contracts and penalties are interpreted in light of the Sarbanes–Oxley and Dodd–Frank Acts. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Daniel Arce, 2015. "Integrity, unprincipled agents and corporate governance reform," European Journal of Law and Economics, Springer, vol. 39(3), pages 539-551, June.
    • Handle: RePEc:kap:ejlwec:v:39:y:2015:i:3:p:539-551
    DOI: 10.1007/s10657-014-9478-4
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    References listed on IDEAS

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    More about this item

    Keywords

    Unprincipled agents; Integrity; Punishment; Incentive pay; Adverse selection; Sarbanes–Oxley; Dodd–Frank; K22; L21; M14; M52;
    All these keywords.

    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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