From shareholder value to CEO power: The paradox of the 1990s

Robert Boyer
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Robert Boyer: PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

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Abstract: Why did CEOs remuneration exploded during the 90s and persisted to high levels, even after the bursting out of the Internet bubble? This article surveys the alternative explanations that have been given of this paradox mainly by various economic theories with some extension to political science, business administration, social psychology, moral philosophy, network analysis. Basically, it is argued that the diffusion of stock-options and financial market related incentives, that were supposed to discipline managers, have entitled them to convert their intrinsic power into remuneration and wealth, both at the micro and macro levels. This is the outcome of a de facto alliance of executives with financiers, who have thus exploited the long run erosion of wage earners'bargaining power. The article also discusses the possible reforms that could reduce the probability and the adverse consequences of CEOs and top-managers opportunism: reputation, business ethic, legal sanctions, public auditing of companies, or shift from a shareholder to a stakeholder conception.

Keywords: Managers'control and remuneration; stock-options; history of quoted corporations; optimal contract theory; economic and political power of managers; Internet bubble; contrôle et rémunération des gestionnaires; histoire des entreprises; théorie des contrats optimaux; pouvoir économique et politique des entreprises; bulle Internet (search for similar items in EconPapers)
Date: 2005-03
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