Abstract
This study analyzes how and why the fall of Enron in 2002 triggered substantive and symbolic changes to executive compensation among U.S. corporations. In particular, we examine the significant legitimacy challenges arising in the post-Enron decade regarding executive stock options, a signature practice normatively advanced by agency theory advocates. We develop a socio-political perspective that considers contestation at the societal, field, and firm levels to explain how and why the post-Enron criticism of stock options generated not only new regulations, but also more complex forms of compensation. We use our framework to predict how differences in intrafirm power (senior management vs. board) and external pressures (media vs. shareholders) drove variance in firm-specific responses to these field-wide changes, testing our predictions using a longitudinal dataset comprised of S&P 500 firms and their senior executives. Our findings reveal that these responses involved both substantial and symbolic changes in compensation, with firms responding more symbolically when CEOs had more power over their boards. We discuss the implications of our approach and findings for future research on executive compensation, corporate governance, and institutional decoupling.
Published Version
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