Executive Compensation, Political Economy, and Managerial Control

Download or read book Executive Compensation, Political Economy, and Managerial Control written by Ernie Englander and published by . This book was released on 2003 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We characterize the period from the end of World War Two to the early 1980s as technocratic and the period since as proprietary. During the technocratic period, compensation differences between CEOs and senior management were quot;marginalquot; in that they reflected their economic contributions to the firm. This facilitated team cohesion among the senior managers, who, like the CEO, had membership quot;rightsquot; to the board over which they, as a team, controlled. Though constrained by antitrust regulations, managers shared knowhow across industries and built a corporate-wide identity through a system of interlocking directorates. While this network educated its participants in corporate-wide issues, those within it still identified first and foremost with their firm, where they spent most of their career. Finally, managers continued to conceive of their profession as one that served a larger social good. First, they accepted a legal duty of care to further the interests of the corporation as a whole. An secondly, they a second fiduciary duty to advance democracy. In contrast, the coalesced proprietary system has encouraged managers to think of themselves as a special class of shareholders. The extensive use of stock options to supplement their base salary has contributed heavily to this shareholder (as opposed to technocratic) managerial self-definition. This occurred as managers weighted their compensation packages with stock options to take advantage of an explosive equities market and alterations in the tax code. As quot;insider shareholdersquot; who aimed merely to enhance their personal fortunes, managers turned their internal labor market into a contest for the prized CEO position. The compensation differential between the one who wins and those who lose have become substantial. Indeed, winners receive packages so large that they enter into the truly privileged sector of the very rich - the top 1 percent of the general population.