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Are Stock Options the Managers' Blessing? Stock Option Compensation and Institutional Controls

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  • Matthias Benz
  • Marcel Kucher
  • Alois Stutzer

Abstract

Stock option grants to top managers have largely contributed to the dramatic increase in US executive pay in recent years. In this paper it is argued that stock options, compared to other forms of compensation, have created strong incentives for managers to engage in lobbying activities for higher compensation. The empirical results presented for the S&P 500 firms and the years from 1992 to 1997 show that the relative success of such skimming activities is shaped by institutional controls. Stock option grants are substantially lower when control by the board of directors and the shareholders is higher, and competition on the product market of a firm is stronger.

Suggested Citation

  • Matthias Benz & Marcel Kucher & Alois Stutzer, "undated". "Are Stock Options the Managers' Blessing? Stock Option Compensation and Institutional Controls," IEW - Working Papers 061, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:061
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    References listed on IDEAS

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    Cited by:

    1. Choe, Chongwoo & Tian, Gloria Y. & Yin, Xiangkang, 2014. "CEO power and the structure of CEO pay," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 237-248.

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    More about this item

    Keywords

    managerial compensation; stock options; corporate governance;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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