Carrots for Good Governance

Bernard E. Munk

Chapter Chapter 5 in Disorganized Crimes, 2013, pp 46-60 from Palgrave Macmillan

Abstract: Abstract There is no doubt that compensation incentives for managers that are unduly focused on contemporaneous results create inherent conflict and a potential for corporate misgovernance. This is especially true when boards fail to exercise skillful discipline of management, particularly with regard to risks undertaken by corporate managers. Under these conditions, shareholder property can be placed at risk without the knowledge of shareholders. Corporate governance can also be undermined by capital market servicers whose personal interests compromise the stewardship that their institutions should display. As their key personnel strive for increased fees and rapid promotion motivated by their own performance pay systems, capital market servicers can be negligent with regard to the risks of their clients. Account officers of these capital market servicers, therefore, also are in a position to create “agency” problems for their own companies. Negligent acquiescence of client financial results can confer a misleading seal of approval by the underwriter that is in turn transmitted to the public market. The ultimate chain of a financial tragedy is made up of many such links.

Keywords: Corporate Governance; Good Governance; Private Equity; Equity Market; Security Market (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-33027-7_5

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DOI: 10.1057/9781137330277_5

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