Comments on Shan and Walter: ‘Towards a Set of Design Principles for Executive Compensation Contracts’

Stacey Beaumont,Sue Wright,Alexander Szimayer,Athanasios Tsekeris,Zoltan Matolcsy,David Hillier,Bryan Howieson,Patrick Mccolgan,Helen Spiropoulos,Philip Brown,David Yermack,Qing Zhou,Peter L Swan,Stephen L Taylor ,Raluca Valeria Ratiu ,Tom W Smith ,Glenn W Boyle ,Raymond Silva Da Rosa ,John D Roberts ,David M Reeb

doi:10.1111/abac.12091

Comments on Shan and Walter: ‘Towards a Set of Design Principles for Executive Compensation Contracts’

Stacey Beaumont, Sue Wright + Show 18 more

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https://doi.org/10.1111/abac.12091

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Journal: Abacus	Publication Date: Dec 1, 2016
Citations: 3

Affiliation: University of Queensland, Macquarie University, Hamburg School of Business Administration, Universität Hamburg, University of Strathclyde, University of Technology Sydney, University of Adelaide, University of Western Australia, UNSW Sydney, Xi'an Jiaotong University, IE University, University of Canterbury, University of Sydney, National University of Singapore

#Restricted Stock Grants #Termination Payments + Show 8 more

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Abstract

This paper is developed around the set of design principles for executive compensation contracts as outlined in the study of Shan and Walter (2014). We propose guidance for determining an appropriate CEO starting compensation level based on past performance and the market for managerial talent. We also outline factors to be considered in determining annual changes to CEO compensation. This paper argues that stock options and restricted stock grants should become exercisable only upon meeting both time and performance criteria against an appropriate benchmark peer group. We agree with Shan and Walter’s (2014) recommendations regarding termination payments and make suggestions on how to apply these recommendations in practice.

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