Professor Lucian Bebchuk's Media Mentions

Media Mentions Archives

(from the Harvard Law School Program on Corporate Governance website)

2008

2007

2008

Wall Street Bonuses Under Fire, National Public Radio, On Point, December 22, 2008
Were the incentives wrong? This hour, On Point: Huge pay, huge bonuses, and where they brought us. Tom Ashbrook discusses the subject with three guests:

Louise Story, business reporter for The New York Times. Her big story last week was headlined "On Wall Street, Bonuses, Not Profits, Were Real." She also reports on how banks are trying to find new ways to handle bonuses.

Lucian Bebchuk, professor of law, economics, and finance and director of the Program on Corporate Governance at Harvard Law School. He’s the author of "Pay without Performance: The Unfulfilled Promise of Executive Compensation."

Steven Kaplan, professor of entrepreneurship and finance at the University of Chicago Business School.
Op-Ed by Lucian Bebchuk and Itay Goldstein: How to Give Banks Confidence to Lend to Businesses, Financial Times, December 19, 2008
On Wall Street, Bonuses, Not Profits, Were Real, The New York Times, December 17, 2008
"Compensation was flawed top to bottom," said Lucian A. Bebchuk, a professor at Harvard Law School and an expert on compensation. "The whole organization was responding to distorted incentives."
CEOs and Market Woes: Is Poor Corporate Governance to Blame?, Knowledge@Wharton, December 10, 2008
... Lucian A. Bebchuk, a law professor at Harvard who specializes in governance, says such reforms would strengthen U.S. corporations, arguing they would serve shareholders better if they adopted some of the United Kingdom's governance rules. In addition to opening the ballots to challengers and shareholder-sponsored issues, reform should include requiring all directors to face election every year, he says.
Putting a Value on a C.E.O., The New York Times, December 1, 2008
"What has caused the most outrage is the difference between pay and actual performance," said Lucian Bebchuk, the director of the program on corporate governance at Harvard Law School. Mr. Bebchuk says he doesn't prescribe limiting compensation; he's fine with outsize pay as long as it matches outsize performance.
The 2009 Proxy Season and the Year of Investor Anger, New York Law Journal, November 17, 2008
If shareholder reimbursement is proxy access lite, a recent proposal by Harvard law professor Lucian Bebchuk can best be described as proxy access "heavy". During the 2008 proxy season, Mr. Bebchuk submitted a proposed bylaw at Electronic Arts that would require the company to include any shareholder proposal in the company's proxy materials so long as the proposal was permissible as a matter of state law and met certain minimal criteria, even if the same proposal, absent the bylaw, would otherwise be excludable under the SEC's Rule 14a-8.
Shareholder Voting Hardly Democratic Way, Chicago Tribune, November 4, 2008
Lucian Bebchuk, a professor at Harvard Law School who has written extensively on shareholder rights, said people approach the different sorts of votes with different expectations. "In the political context, voting is viewed by many, and rightly so, as an end in itself," Bebchuk said. "In the corporate context, the argument for shareholder voting is a functional argument. It's not that voting is desirable in itself."
Optimistic Activists, The Deal Newsweekly, October 31, 2008
Carl Icahn named strong candidates to Yahoo! Inc.'s board, including Harvard Law School professor Lucian Bebchuk and investor Mark Cuban. Jana Partners LLC's industry-expert candidates helped facilitate a $1.8 billion sale of Cnet Networks Inc. to CBS Corp. in May.
Op-Ed by Lucian Bebchuk: The Rescue Plan: Direct Capital Investments Would be Better for Both Markets and Taxpayers, Financial Times, October 1, 2008
Government's Bailout Path a Maze of Unknowns, Los Angeles Times, October 4, 2008
Harvard Law School professor Lucian A. Bebchuk suggested in a recent paper that the government divide its fund into, say, 20 equal portions and promise the manager of each a set percentage of the profit generated by his or her purchases over time. "The competition among these 20 funds would prevent the price paid for these mortgage assets from falling below fair value," he wrote, "and the fund managers' profit incentives would prevent the price from exceeding fair value."
Wary of Public Outcry, Revised $800B Wall St. Bailout Stuffed with Earmarks to Sway Election-Year Incumbents, Democracy Now: The War and Peace Report, October 3, 2008
"... I think it was a very misconceived bill. Paul Krugman, Joe Stiglitz, John Makin on the American Enterprise Institute, Alex Pollock, the American Enterprise Institute, Lucian Bebchuk at Harvard Law School and Olin Foundation—these are conservatives and liberals all standing around saying, "Why are you doing the wrong thing, Secretary Paulson?" And Congress went along."
Op-Ed by Lucian Bebchuk: How to Pay Less For Distressed Financial Assets, WSJ.com, September 26, 2008
McCain's Choice, The Weekly Standard, September 26, 2008
... 3. Improve on both Paulson and House Republicans with a new offer. This, based on my admittedly imperfect understanding of all this (but McCain has access to people with really good understanding), might be a combination of Larry Lindsey's refinance-home-owners proposal and Lucian Bebchuk's (and others') proposal for direct bank recapitalization through Treasury security purchases and right offerings to shareholders.
McCain Appears Wrong on Fannie Pay, MSNBC, September 19, 2008
Lucian Bebchuk of Harvard Law School, an expert on corporate governance, confirmed to First Read that Fannie Mae and Freddie Mac were private companies until being recently taken over by the federal government (which came after Raines' and Johnson's tenures). Bebchuk said that maybe McCain was referring to past Fannie shareholders in the audience when he asserted that the executive compensation was "your money." Or perhaps McCain was making the point -- very loosely -- that now the federal government has taken over Fannie, any money that Raines or Johnson received is money taxpayers no longer have. But both assertions, he said, would be stretches.
Need a Job? $17,000 an Hour. No Success Required., The New York Times, September 18, 2008
"Compare the massive destruction of wealth for shareholders to what he gets at the end of the day," said Lucian Bebchuk, the director of the corporate governance program at Harvard Law School. A central flaw of governance is that boards of directors frequently are ornamental and provide negligible oversight.
How Long Will Politicians Look the Other Way on CEO Pay?, The Christian Science Monitor, August 25, 2008
Shareholders have become somewhat more aware of the cost of high executive pay. A study by Harvard University professors Lucian Bebchuk and Yaniv Grinstein found that the pay and benefits given to the top five executives in a large group of big corporations in the years 2001 to 2003 amounted to 10 percent of the total earnings of these firms. So executive pay is no longer an insubstantial matter to shareholders.
Yahoo Selects Biondi, Chapple as New Board Members, The Associated Press, August 14, 2008
Icahn remains highly motivated to boost Yahoo's stock price because he paid about $25 per share to acquire his stake in the company, but since the July agreement, he has appeared more willing to give Yang more time to prove himself.

Yahoo had until Friday to pick the two directors from Icahn's allies. Icahn's short list also included Mark Cuban, who sold Broadcast.com to Yahoo in 1999; venture capitalist Adam Dell; Harvard Law professor Lucian Bebchuk; and co-CEO of New Line Cinema, Robert Shaye.
Yahoo Vetting Icahn's Board Nominees: report, MarketWatch, August 12, 2008
The new additions to the Yahoo board will be pulled from the list of names that Icahn originally floated as an alternate slate of directors for his proxy battle. They include Biondi, Chapple, Internet billionaire and Dallas Mavericks owner Mark Cuban, former New Line Cinema CEO Bob Shaye, venture capitalist Adam Dell, former Clearbridge Advisors CEO Brian Posner, Harvard law professor Lucian Bebchuk and long-time Icahn associate Keith Meister.
Small Shareholders Get a Chance to Question Yahoo's Yang, San Jose Mercury News, July 31, 2008
One of Yahoo's directors, Robert Kotick, will resign and the board will then have two weeks to appoint two other directors from a list that includes Jonathan Miller, former chief executive of AOL, and Lucian A. Bebchuk, Frank J. Biondi, Jr., John H. Chapple, Mark Cuban, Adam Dell, Keith Meister, Edward H. Meyer, and Brian S. Posner, each of whom was on Icahn's slate of director nominees.
Yahoo Settles To Avert Proxy Fight, Gives Icahn 3 Director Slots, eBrandz, July 22, 2008
Yahoo said Icahn and two allies of his choice will round out the board, keeping current Chairman Roy Bostock and Yang in place in exchange for Icahn withdrawing a slate of nominees he was backing to replace the incumbents.

Icahn had originally vied to replace the company’s entire board, with Lucian A. Bebchuk, Frank J. Biondi Jr., John H. Chapple, Mark Cuban, Adam Dell, Keith A. Meister, Edward H. Meyer, and Brian S. Posner as his candidates.
Yahoo Settles With Investor Carl Icahn, DMNews, July 21, 2008
According to a July 14 US Securities and Exchange Commission filing, Icahn's nominee list includes Lucian Bebchuk, Frank Biondi Jr., John Chapple, Mark Cuban, Adam Dell, Keith Meister, Edward Meyer and Brian Posner. According to Yahoo, Jonathan Miller, a partner in the Velocity Interactive Group and former Chairman and CEO of AOL, has been added to the list of nominees.
Details of Yahoo (YHOO) And Carl Icahn Agreement; Must Maintain Ownership of 30M Shares, StreetInsider, July 21, 2008
The Yahoo Board will appoint two individuals to serve as directors of the Company until no earlier than the 2009 Annual Meeting, subject to the terms of the Settlement Agreement, which individuals will be selected at the Board’s sole discretion, upon the recommendation of the Company’s Nominating and Corporate Governance Committee, from the following list: Lucian A. Bebchuk, Frank J. Biondi, Jr., John H. Chapple, Mark Cuban, Adam Dell, Keith Meister, Edward H. Meyer, and Brian S. Posner, each of whom was on the Icahn Group’s slate of director nominees, and Jonathan Miller.
Icahn and Yahoo Reach Agreement, Billionaire Takes 3 Seats in Yahoo's Board, eFluxMedia, July 21, 2008
The 8 persons that Icahn will choose from are Lucian A. Bebchuk, named one in the 100 most influential players in corporate governance according to the Directorship magazine, Adam Dell, the brother of the man behind Dell Inc., as well as John H. Chapple, Frank J. Biondi Jr, Mark Cuban, Brian S. Posner, Edward H. Meyer and Keith A. Meister.
Yahoo, Carl Icahn Settle Before Proxy Fight, eWeek, July 21, 2008
The potential Icahn nominees are: Keith Meister, principal executive officer of Icahn Enterprises; Dallas Mavericks owner Mark Cuban; former Viacom CEO Frank J. Biondi Jr.; Adam Dell, venture capitalist; Harvard professor Lucian Bebchuk; former Nextel Partners CEO John Chapple; investment manager Edward Meyer; money manager Brian Posner; and Robert Shaye, founder and co-CEO of New Line Cinema. Bostock, Yahoo CEO Jerry Yang and Icahn all cheered the compromise in unique fashion, though it was Bostock's comment that stuck out.
Board Compromise Suggested For Yahoo, WebProNews, July 21, 2008
Four Icahn slate nominees: Adam Dell, brother of PC magnate Michael, Edward Meyer, John Chapple, and Lucian Bebchuk, earned a place in Jackson's choices. Even more attention to this group will happen on Tuesday, when Yahoo reports quarterly earnings after market close.
Yahoo Activist Calls for Board Battle Compromise, Reuters, July 21, 2008
He called on shareholders to support four Icahn nominees, including Adam Dell, a venture capital investor and investor in start-up HotJobs which was sold to Yahoo, two advertising executives, Edward Meyer and John Chapple, along with Harvard professor and outspoken executive pay critic Lucian Bebchuk. "We are confident this new hybrid Yahoo board can effectively conclude a deal with them (Microsoft)," Jackson said.
Yahoo Shareholder Urges Compromise in Board Battle Over Microsoft Deal, The Guardian, July 21, 2008
"We are confident this new hybrid Yahoo board can effectively conclude a deal with [Microsoft]," said Jackson, who wants to encourage voters to opt for HotJobs investor Adam Dell, Harvard professor Lucian Bebchuk and two advertising executives, John Chapple and Edward Meyer.
A Truce for Yahoo, but the War May Not Be Over, The New York Times, July 21, 2008
Mr. Miller represents a fine addition to Yahoo’s board. The rest of the slate presents a tougher choice. Mark Cuban has real Internet experience. But his biggest moment was selling Broadcast.com to Yahoo for $5 billion, one of Yahoo’s worst deals ever. Otherwise, the choice is a bit of a grab bag. Among them are Frank J. Biondi Jr., the former chief executive of Viacom, Adam Dell, a venture capitalist and brother of the PC monger, and Lucian A. Bebchuk, a law professor and shareholder rights advocate.
Investor Activist Urges Yahoo Shareholders To Split The Difference Between Icahn's Board Picks and Yahoo's, The Washington Post, July 20, 2008
If a majority of the board is replaced, the poison-pill severance package might be triggered. So Jackson is recommending that shareholders vote for four of Icahn's nominees (Adam Dell, John Chapple, Lucian Bebchuk, and Edward Meyer) and keep five of the current board members (Vyomesh Joshi, Robert Kotick, Maggie Wilderotter, Gary Wilson, and Jerry Yang).
Miller Backs Yahoo Board; Adviser for Icahn, Pensions & Investments, July 18, 2008
In the Legg Mason statement, Mr. Miller said, "We believe the board is independent and focused on value creation for long-term shareholders. … Mr. Icahn's slate includes people experienced in technology, advertising, capital markets and governance. We would prefer that the company and Mr. Icahn reach a mutual agreement on the composition of the board and end this disruptive proxy contest," although Legg Mason will vote for the entire existing Yahoo board.

Mark Cuban, Internet entrepreneur and controlling owner of the NBA’s Dallas Mavericks; Lucian A. Bebchuk, Harvard Law School professor; and Mr. Icahn, managing partner of Icahn Partners, are among the nine candidates on the Icahn slate.
Yahoo's Current Board Versus Icahn's Challengers, The Associated Press, July 14, 2008
Carl Icahn moved ahead with his attempt to overthrow Yahoo Inc.'s board of directors by submitting his final list of candidates Monday. The nominees remain the same as those he first provided in May, except the list has been whittled from 10 to nine candidates to reflect Yahoo's decision to reduce the size of its board. Here's a look at the incumbents and the Icahn-led opposition... Lucian Bebchuk: A professor at Harvard Law School, where he is also the director of the program on corporate governance.
Shareholder Sedition, Forbes, June 30, 2008
Carl Icahn hasn't yet cleaned out Yahoo's executive suite. Pulling off a putsch is expensive and risks countersuits. "A challenger has to bear the costs," says Harvard Law professor Lucian A. Bebchuk, "but would be able to capture only a limited fraction of the benefits produced for shareholders." One small triumph doesn't make a trend.
Yahoo Investor Urges Board Compromise With Icahn, Reuters, June 16, 2008
... From the Icahn slate, he endorsed venture capitalist Adam Dell, who is Dell Inc chief Michael Dell's brother; Harvard law professor Lucian Bebchuk; former Nextel CEO John Chapple; and former Grey Global CEO Edward Meyer.
Four New Yahoos?, The Wall Street Journal, June 13, 2008
Yahoo shareholders also should favor directors who bring more than a simple willingness to vote yes to a sale to Microsoft. There is a quartet from Mr. Icahn's slate who fit the bill. Lucian Bebchuk is an expert in corporate governance and compensation -- where Yahoo's board falls short, as the severance-pay plan shows.
A 'Chewable' Poison Pill, Directorship, June 1, 2008
After early rejections by CA and others, Bebchuk changed the proposal to make it more palatable to boards. Since then, the bylaw has been adopted by AIG, Time Warner, and more recently, CVS, Disney, Bristol-Meyers Squibb and JCPenney.
Yahoo Delays Proxy Battle, Inthenews.co.uk, May 23, 2008
Mr. Icahn has put together a team of ten high-profile figures, including National Basketball Association owner Mark Cuban, New Line Cinema co-chairman Robert Shaye and economics professor Lucian Bebchuk.
Icahn's Gate Crashers Could Be Asked to Stay, The Wall Street Journal, May 21, 2008
Possibilities abound, and Mr. Icahn's nominees may thrive regardless of what happens. Consider Harvard's Prof. Bebchuk. He has written extensively on corporate governance. Having firsthand experience of a proxy contest may add to his academic cachet.
A Gamble, but What if He Wins?, The New York Times, May 20, 2008
The irony is that Mr. Bebchuk, who Mr. Icahn is nominating for Yahoo’s board, wrote a paper in 2001 with the following conclusion: "Proxy fights unaccompanied by an acquisition often suffer from substantial shortcomings that limit the use of such contests in practice."
Paying For Failure, Forbes, May 19, 2008
The top-paid executives at the country's public companies now collect pay equal to 10% of corporate profit, according to a 2005 study by Lucian Bebchuk of Harvard Business School and Yaniv Grinstein of Cornell University.
The Yahoo Final Exam, DealBook (New York Times Blogs), May 16, 2008
A member of the Icahn-nominated slate is Lucian Bebchuk, a law school professor and noted corporate-governance activist who is a vocal advocate for increased shareholder democracy. Mr. Bebchuk is very, very smart.
Yahoo's Odd Couple, The Wall Street Journal Blogs, May 15, 2008
You couldn't find two people more opposite in temperament than Bebchuk, who maintains an intellectual, diplomatic, somewhat formal manner and a deep interest in research, and Cuban, who is famously outspoken and is known for his good instincts on business.
Text of Icahn's Letter to Yahoo Board, The New York Times, May 16, 2008
Bebchuk has been a frequent contributor to policy making and public discourse in the corporate governance area. He has appeared before the Senate Finance Committee, the House Committee of Financial Services, and the SEC. He has published many op-ed pieces, including in the Wall Street Journal, the New York Times, and the Financial Times. He was included in the list of "100 most influential people in finance" of Treasury & Risk Management and the list of "100 most influential players in corporate governance" of Directorship magazine.

Other related articles:

CalPers Calls for Change to Standard Pacific's Board, Orange County Business Journal, May 5, 2008
... In a recent filing with the Securities and Exchange Commission, CalPers cites a 2004 study by Harvard professor Lucian Bebchuk as justification for the proposal. The study found "that companies with staggered boards, poison pills, supermajority voting requirements and golden parachutes deliver less shareholder value than those companies that do not have such measures in place."
A $74 Million Bargain, Forbes, April 30, 2008
... Lucian Bebchuk, director of the corporate governance program at Harvard Law School, says the recent troubles in the financial sector highlight the need to follow a basic principle when arranging executive compensation plans: "If it isn't earned, it should be returned."
Wall Street Roundup: Electronic Arts Sued by Investor, Los Angeles Times, April 22, 2008
... The suit, filed by Harvard Law School professor Lucian Bebchuk in U.S. District Court in New York, seeks an order requiring the company to submit a proposed bylaw amendment to a shareholder vote.
CalPERS Pushes for Clean House at Standard Pacific, TheStreet.com, April 17, 2008
In a letter to fellow shareholders filed Thursday with the Securities and Exchange Commission, CalPERS cites a 2004 study by Harvard professor Lucian Bebchuk, that said "companies with staggered boards, poison pills, supermajority voting requirements and golden parachutes deliver less shareholder value than those companies that do not have such measures in place."
Roundtable Review of Corporate Governance, Nightly Business Report, March 21, 2008
The corporate board of directors is at the center of complaints about the system of corporate governance. Critics, such as Lucian Bebchuk of Harvard Law School, point to an alleged lack of concern that many boards have for stockholder interests.
Battling Moguls Take the Stand, CNN Money.com, March 10, 2008
"This case will hinge on the testimony," says Lucian Bebchuk, director of Harvard Law School's Program on Corporate Governance. "When the court tries to interpret a situation like this, they look at communications between parties, and the reasonable expectations the parties had. The court will get that from the testimony."
Yahoo's Position Is Weak, Its Options Few, CondeNast Portfolio.com, February 5, 2008
"Not having a staggered board reduces the likelihood of remaining independent in the face of a premium offer," says Lucian Bebchuk, a professor of corporate governance at Harvard Law School…"For Yahoo to be able to resist this, they would have to convince its shareholders there is value in continued independence," says Bebchuk.
Monks' Tale is a Governance Tragedy, Canada Globe and Mail, January 30, 2008
A study by Harvard law school professor Lucian Bebchuk has found that, in total, the top five executives of U.S. public companies saw their compensation rise significantly between the mid-nineties and early 2000s. As a function of a company's profit, he found that, over all, their compensation rose from 4.7 per cent of profits in 1993-1995 to 10.3 per cent in 2001-2003.
AG Looking Into $16.4m Severance: Blue Cross-Blue Shield Payment to ex-CEO Seen as Extraordinary, The Boston Globe, January 24, 2008
Lucian Bebchuk, director of the Program on Corporate Governance at Harvard Law School, said a lead director can be an effective foil to a powerful chairman and chief executive. "The labeling of someone as lead director by itself carries no magic," he said. "You need to give this person responsibilities for the title to produce an improvement in governance. They must be able to chair meetings of independent directors and to have some role in setting the agenda for meetings of the full board."

2007

Extreme CEO Payoffs: When Shareholders Lose, CNNMoney.com, December 10, 2007
Still, compensation consultants have "strong incentives to use their discretion to benefit the CEO," according to a 2003 study by Lucian Bebchuk of Harvard University and Jesse Fried of the University of California at Berkeley. "Providing advice that hurts the CEO's pocketbook is hardly a way to enhance the consultant's chances of being hired in the future," wrote the professors. "Moreover, consulting firms often have other, larger assignments with the hiring company, which further increases their incentive to please the CEO."
Conference Tackles Role of Shareholder Activism, New York Law Journal, December 10, 2007
Lucian Bebchuk, a professor at Harvard Law School, said that shareholders should have access to "the rules of the game that regulates boards and directors" by being able to amend company bylaws. Bebchuk has presented reform measures to the annual meetings of several large corporations, including Long Island, N.Y.-based CA.
What if C.E.O. Pay Is Fair?, The New York Times, October 13, 2007
I asked Lucian Bebchuk, the big compensation critic at Harvard, what would happen if C.E.O. pay was finally subjected to real market forces. My worry is that it has risen so high in the rigged market that it would never come down, even in a real one. Professor Bebchuk disagreed. "We cannot predict the true market level because we have not had a well functioning market," he said. "But markets do adjust. If the true market level were significantly below the current level, then compensation would go down. It wouldn't happen overnight, but it would happen."
Why More Companies Look Elsewhere For CEO Talent, Financial Week, August 20, 2007
" '... you have to pay a lot to compete with other firms for the top managers, and that pay will depend on how much of a CEO's skills are transferable across firms and industries.'

It's a counterargument to a theory proposed by Harvard professor Lucian Bebchuk, which argues that the escalation in executive pay has been determined by board cronies rubber-stamping fat packages."
Scrutinizing Compensation, Forbes, August 14, 2007
Yaniv Grinstein, an assistant professor of finance of the Johnson School at Cornell University, has recently studied options backdating. He and co-authors Lucian Bebchuk and Urs Peyer questioned what this not always illegal practice tells us about the state of corporate governance. Backdating is the practice of granting a stock option, a common form of compensation for executives, which is dated prior to the date the company actually granted the option. Depending on the circumstances, backdating might not be illegal.
Beckham Bends It Like A CEO, LA Daily News, August 4, 2007
I don't get it. Where is the outrage? Politicians and pundits love to "bend it" when it comes to stoking resentment about what they call excessive pay for corporate executives. Yet not even the most populist pol is screaming about the inequality of the contract that will pay David Beckham more in one season than the average Los Angeles Galaxy fan will earn in a working lifetime.In their influential book, "Pay Without Performance," Harvard and Berkeley law professors Lucian Bebchuk and Jesse Fried acknowledge that "star athletes are highly paid, some more than the average S&P 500 CEO." But they claim that "the process generating the compensation" for sports stars is "quite different" than that for CEOs.
Disney Amends Bylaws To Limit 'Poison Pill' Provisions, Associated Press, July 2, 2007
The Walt Disney Co. (DIS) has adopted a plan to limit the use of so-called poison pill shareholder rights plans that are designed to thwart hostile takeovers…The proposal adopted by Disney's board is a version of the one being promoted by Harvard law professor and corporate governance expert Lucian Bebchuk. Bebchuk had wanted Disney's board to agree to a 75% vote to approve any poison pill. Disney objected, saying the proposal was too inflexible. The company has not had any kind of poison pill provision in place since the late 1990s.
CEOs Under Fire, The National Journal, June 16, 2007
If Ferlauto represents the (feather-covered) face of the "say on pay" effort, the real father of the idea is Lucian Bebchuk, a Harvard University economist and law professor who, more than any other individual, has supplied the research and rhetorical firepower for the movement to rein in executive pay, mostly in the past six or seven years. In a blizzard of papers, books, and op-eds, along with congressional testimony and television appearances, Bebchuk has challenged the conventional argument that CEO pay is based on free-market forces in which rational shareholders of a company pay no more than what a particular executive deserves, based on the person's talent and the value that his or her contributions add to the company.
Activist Investors Get More Respect: Boards are Listening, and Shareholder Proposals are Making Headway, Business Week, June 11, 2007.
When Harvard Law School professor Lucian A. Bebchuk filed a shareholder proposal with Home Depot Inc. HD on Dec. 12, his expectations were low. It asked the company to require that two-thirds of its board approve executive compensation plans--a novel concept that hadn't been tested in prior proxy seasons. Bebchuk also sought to have the change written into Home Depot's corporate bylaws, something most companies are loath to do. "I did not expect [they] would be willing to make changes in the bylaws in response to a proposal by someone who really is an individual shareholder," says Bebchuk, who owns just 90 shares.
Half of CEOs Made More Than $8.3M at S&P 500 Companies Examined by the AP, Associated Press, June 7, 2007.
Some boards, apparently, are starting to agree. Harvard law professor Lucian Bebchuk, author of the book "Pay Without Performance," said board members have been calling him to talk about proposals he made this year at a handful of companies to give shareholders a louder voice on pay.
The Activist Professor, The Daily Deal, June 1, 2007.
By converting his academic work on takeover defenses and executive comp into bylaw proposals at major corporations, Harvard's Lucian Bebchuk has become an unlikely corporate governance star.
The Contrarian, Stephen Bainbridge vs. Lucian Bebchuk: an intellectual battle. The Daily Deal, June 1, 2007.
"Yes, accountability is important, but there are countervailing advantages to authority that people like Lucian Bebchuk don't give credence to," says Stephen Bainbridge, a corporate law professor at the University of California, Los Angeles, who's waged an intellectual battle against Bebchuk in law reviews and on his well-read blog. "He's too caught up with this image of American businessmen and women as rapacious people who must be controlled by activist shareholders."
Food for Thought, The Daily Deal, June 1, 2007.
Listokin points out that management can spend corporate assets to solicit votes, while dissidents cannot, and that management retains oversight of the ballot counting. Management can also get a running count of voting results, while dissidents cannot. And like Kahan and Rock, Listokin casts a skeptical eye at ADP, which he believes should be subject to some form of oversight. As Kahan and Lucian Bebchuk did in one paper, Listokin also argues that companies should partially reimburse opponents of management-sponsored resolutions if they receive a certain percentage of the vote.
Pay Check, The New Republic, May 21, 2007.
Harvard's Lucian Bebchuk and Berkeley's Jesse Fried have found lots of evidence supporting this theory. The two have looked at all the factors one would associate with a weak board of directors—the CEO is a director of the board, or a member, or the members serve on several boards—and all of them correlate with higher CEO pay. The discovery that executive compensation is dependent not just on supply and demand but on the independence of the board of directors helps explain lots of facts that the pure free-market model can't—unnecessarily complicated pay schemes, bonuses to fired executives who were owed nothing, et cetera.
Dollars and Democracy, Forbes, May 21, 2007.
Executives need an incentive to get up in the morning. Maybe they don't need that much. In any event the sin in corporate pay is not so much its magnitude as the fact that it is often completely decoupled from performance, as Harvard law professor Lucian Bebchuk has documented.
Dow Jones Board Won't Act As Bancrofts Deliberate, Wall Street Journal, May 17, 2007.
"The view of corporate law in the U.S. is that directors don't always have to do what shareholders tell them to do," said Lucian Bebchuk, a professor at Harvard Law School who studies corporate boards and governance issues. "It is reasonable to think the Dow Jones directors should explore the offer, investigate it and make a formal recommendation to shareholders."
Web Winners, The Philadelphia Inquirer, May 13, 2007.
The Harvard Law School's blog on corporate governance is a heady forum about related legal matters, such as proposed and pending legislation, and court rulings on insider trading and shareholder empowerment. Contributors include Lucian Bebchuk, director of Harvard's program for corporate governance and a vocal critic of stratospheric pay for corporate executives.
A New Delaware? The Daily Deal, May 7, 2007.
Corporation franchise fees are a major source of revenue for Delaware, and North Dakota also hopes to profit from them. It will charge fees that are half of Delaware's and would earn them in two ways: Either companies would go public as corporations of that state, or already-public companies would reincorporate there. The latter will likely prove difficult, says Lucian Bebchuk, a professor at Harvard Law School, since boards control reincorporation decisions. Clark says that shareholder pressure may over time push companies to leave Delaware for another jurisdiction.
How to Limit Executive-Pay Scandals, The New Republic, May 5, 2007.
Last year, the president of the United States—the CEO of the country—was paid $400,000, with a $50,000 allowance for expenses and up to $100,000 for travel. The amounts are fixed by statute and do not vary with the success or failure of his administration. With responsibilities hardly comparable to the president's, the CEO of Citigroup made nearly $26,000,000 in 2006 (counting all benefits). He may have done better in his job than the luckless president did in his, but surely not 47 times better. Further, if the average annual wage of non-executive employees of Citigroup was, say, $50,000, the CEO made 520 times their salary…The cumulative effect of this pleonexia—the revived word for abnormal greed—is "hardly pocket change," as Lucian Arye Bebchuk and Jesse M. Fried wrote in the Journal of Corporation Law two years ago.
Shareholders One Step Closer to Having a "Say on Pay", SocialFunds.com, May 3, 2007.
Executives at top companies command huge salaries, millions of dollars a year with perks and stock options. People might agree or disagree whether some of these CEOs, CFOs and COOs earn their huge paychecks, but no one can say $1 million a year (or more) is a small amount of money. A Bloomberg poll from March 2006 found that more than 80% of Americans polled—divided evenly between the well off and those making under $10,000 a year—agreed that CEOs are paid "too much." According to Harvard Professor Lucian Bebchuk, who recently testified before the House Financial Services Committee, over the past 15 years the salaries of Fortune 500 CEOs have risen from 140 times what an average worker makes, to over 500 times an average worker's pay. Businesses are required to post the minimum wage in a visible location—currently $5.15 an hour. These same businesses certainly don’t post what their maximum wage earners are making.
America Frets about Executive Pay, Financial Times, May 3, 2007.
The US House of Representatives recently passed a bill to strengthen shareholder oversight of top executive pay. More than 50 Republicans joined the majority. The law's prospects in the Senate (where a similar bill was immediately introduced by Barack Obama) are uncertain, but that Republican backing in the House was telling in itself. The narrow issue of top executive pay, tucked inside the broader issue of rising inequality of incomes, appears to be gaining some unaccustomed political traction… The leading academic spokesman for the view that the system is broken is Lucian Bebchuk of Harvard Law School. Mr Bebchuk testified in support of the proposed "say on pay" law to a House committee in March. He argues that patterns of top pay reflect an abuse of managerial power - in effect, that pay is not negotiated at arm's length, but among insiders, with much mutual back-scratching and boards failing in their duty to shareholders.
Congress Pecks Away at CEO Pay, Christian Science Monitor, April 30, 2007.
Maybe, at last, corporate executive pay is being tamed. Three years ago, Business Week magazine headlined a story on executive pay, "The Gravy Train May Be Drying Up." It didn't happen. Last year, chief executive officers at 350 large American corporations enjoyed an 8.9 percent average boost in direct compensation (salary, bonus, benefits, and long-term incentives), finds Mercer Human Resources Consulting, in New York. Median compensation for the CEOs was $8.2 million. Half got more, half got less… Executive pay is no longer a simple matter of envy. It has "macroeconomic" consequences, according to a study by Lucian Bebchuk of Harvard Law School and Yaniv Grinstein of Cornell University. They found that the aggregate compensation paid to the top five executives in US public companies had reached 10 percent of profits, roughly $350 billion, in 2003 – twice the 5 percent level of 1993. "This issue is not merely symbolic but rather of practical significance," Professor Bebchuk testified to Frank's committee.
More Intrusive Federal Rules For Executive Compensation Unjustified, Washington Legal Foundation, April 27, 2007.
In their book, "Pay Without Performance" (Cambridge, MA: Harvard University Press, 2004), upon which House Report 110-088 heavily relies, law professors Lucian Bebchuk and Jesse Fried contend that actors and sports stars bargain at arms'-length with their employers, while managers essentially set their own compensation. As a result, they claim, even though managers are under a fiduciary duty to maximize shareholder wealth, executive compensation arrangements often fail to provide executives with proper incentives to do so and may even cause executive and shareholder interests to diverge. In other words, the executive compensation scandal is not the rapid growth of management pay in recent years, but rather the failure of compensation schemes to award high pay only for top performance.
Ten Ways to Restore Investor Confidence in Compensation, Wall Street Journal, April 9, 2007.
Outrage over executive compensation has hit a boiling point. And it may get worse before it gets better. New proxy disclosure rules approved by the Securities and Exchange Commission last July are shedding a harsh light on the breadth of corporate chiefs' oversized packages. The overhaul requires companies to provide a total compensation figure for each of their top five officers… Investors should be able to figure out whether generous bonuses reflect good performance or poorly set targets, says Lucian Bebchuk, a Harvard Law School professor and co-author of the book "Pay Without Performance."
A Corporate Governance Gadfly Irks CEOs, Fortune, April 4, 2007.
He insists he isn't an activist. Plenty of America's CEOs must hope he means it. "I'm mainly a kind of ivory tower academic," says professor Lucian Bebchuk of Harvard Law School, and that he surely is - the only person I know of with four graduate degrees from Harvard (master's and doctoral degrees in law and economics). … Bebchuk is best known for careful research that skewers the way CEOs get paid. From the bosses' perspective he has been distressingly energetic, not only writing a book ("Pay Without Performance") but also delivering lectures, contributing op-ed pieces, conducting seminars and testifying before Congress.
Does It Pay to Tell Investors Extra Compensation Details? Wall Street Journal, April 2, 2007.
Many U.S. corporate directors are grumbling about complex new federal rules requiring more disclosure of executive pay, perquisites and retirement benefits. Yet a surprising number of major corporations are going beyond the requirements, offering investors additional details about compensation, in the name of improved transparency… Lucian Bebchuk, a Harvard law professor and El Paso investor who has clashed with the board, isn't impressed. He says the profiles don't comply with the SEC rules - leaving out, for instance, total compensation - and are more prominently placed than they should be.
Panel Approves Frank's Signature Exec. Compensation Bill, National Journal's CongressDaily, March 29, 2007.
A recent study of executive compensation by Harvard Law School Professor Lucian Bebchuk and Cornell University Professor Yaniv Grinstein showed that in the 12 years between 1991 and 2003, the average salary of corporate executives grew from 140 times that of the typical worker to 500 times.
Backdated Options May Snare Some Directors as Critics Blast Rubber-Stamping, USA Today, March 29, 2007.
As the pace of investigations quickens in the stock-option backdating scandals and companies kick off their annual shareholder meetings, there's mounting evidence that many directors failed in their roles as corporate watchdogs and may soon face consequences. … The "Lucky Directors" study, by scholars at Harvard and Cornell universities and the INSEAD business school, found that 9% of 28,764 dates when grants were awarded to one or more directors between 1996 and 2005 fell on days when their companies' stock prices hit a monthly low. "A large number of directors - much larger than those named in legal proceedings - received stock-option grants that were opportunistically timed," says Lucian Bebchuk, a Harvard Law School professor who co-authored the study.
Exec Pay Anger Spurs Disclosure Rules, Shareholder Input, But Not Salary Caps, Investor's Business Daily, March 28, 2007.
Amid growing public criticism of lavish CEO pay, the government is moving to push public corporations to disclose and justify executive compensation. But so far Congress and regulators aren't trying to limit salaries. … According to the Corporate Library, the median CEO pay was $13.5 million in 2005, up 16% from the year before. CEOs earn about 500 times more than the average worker, up from 140 times in 1993, according to Harvard Professor Lucian Bebchuk.
How Five New Players Aid Movement to Limit CEO Pay, Wall Street Journal, March 13, 2007.
Harvard Law School Professor Lucian Bebchuk is one of the intellectual engines of the pay-restraint movement, producing studies arguing that weak boards are paying executives without regard to company performance. Mr. Frank has cited Mr. Bebchuk's research showing executives claiming a growing share of corporate profits. SEC Commissioner Roel Campos says Mr. Bebchuk’s pension research was 'very influential' in crafting the new disclosure rules. In 2000, Mr. Bebchuk, who holds doctorates in both law and economics, began working on compensation issues, using as a base his previous work on boards' lack of accountability during takeovers. In 2004, he co-wrote a book, "Pay Without Performance," which criticized boards for offering CEOs sizable pay deals.
Bristol-Myers Tightens Process for Setting C.E.O. Pay, New York Times, March 13, 2007.
Responding to a drumbeat for better corporate governance, Bristol-Myers Squibb said today that it had agreed to a new guideline for establishing pay for its chief executive. ... The decision followed a proposal submitted by Lucian Bebchuk, a professor at Harvard Law School. Professor Bebchuk said that the company initially resisted his idea, but agreed last week. Mr. Bebchuk posted a history of his proposal online. In a statement, a Bristol-Myers spokesman, Tony Plohoros, said: "Our board of directors agreed in principle with Mr. Bebchuk's proposal. As such, our board has adopted a new corporate governance guideline that calls for 75 percent of independent directors to approve C.E.O. compensation."
Soaring Executive Pay Meets Reforms, Reuters, March 9, 2007.
"Shareholders' rights in the U.S. are weak and significantly weaker than in other common law countries," says Harvard University Law Professor Lucian Bebchuk.
Investors Back 'Say on Pay' Bill, Wall Street Journal, March 8, 2007.
Investor advocates on Thursday expressed support for a Democratic bill that would give shareholders at U.S. companies the right to cast a nonbinding vote on executive pay. The American Federation of State, County and Municipal Employees, a union group, joined a Harvard University law professor and corporate governance experts to tell a House panel that an advisory vote would give investors a mechanism to influence board directors who set pay for public-company executives. "An expression of widespread shareholder dissatisfaction would provide a valuable signal to the board," Lucian Bebchuk, director of the corporate governance program at Harvard Law School, said in prepared testimony. "The fact that the outcome of the vote would be publicly known would apply some pressure on the board to take the shareholders' preferences into account."
Panel Split Over Requiring Shareholder Vote On Exec Pay, National Journal's CongressDaily, March 8, 2007.
Proponents of Frank's bill noted the United Kingdom has a similar system and there have not been any repercussions. Instead, it has helped increase the level of dialogue between institutional investors and boards, they said. "I think there is really no evidence that the management of European companies are doing worse because of this requirement," said Lucian Bebchuk, a Harvard University professor who has studied the issue. In addition, one major U.S. corporation, Aflac, has gone to such a system. John Castellani, president of the Business Roundtable, which opposes the bill, said U.S. boards are more independent than those in the United Kingdom and that American board members are held to a higher legal standard than U.K. members, thus bringing a higher standard of corporate governance. "Corporations were never designed to be democracies. Their decision-making process was not designed to be run like a New England town hall meeting," Castellani said.
Disney Pencils in a Return to Hand-Drawn Films, MarketWatch, March 8, 2007.
Also at the meeting, all 11 Disney directors were re-elected to the board with 98% of the vote. Disney investors, however, voted with a majority of 58% in favor of a shareholder-rights plan that the company's board and management had opposed. The plan would restrict the board's ability to enact a so-called poison pill to fend off a takeover. But the proposal needed a two-thirds majority to be enacted. Company officials said they would give consideration to creating a similar initiative. The proposal was proposed by Harvard Law School professor and corporate-governance expert Lucian Bebchuk.
CEO Group Hits US Bill on Shareholder Pay Votes, Reuters, March 8, 2007.
A lobbying group for corporate CEOs on Thursday criticized as misguided a move to let U.S. shareholders vote on CEO pay packages. ... In 2003, the average CEO got roughly 500 times as much pay as the average worker, compared to a multiple of 140 in 1991, said Harvard Law School Professor Lucian Bebchuk.
Executive Compensation Debate: Congress Set to Weigh in, Investors Could Get More Voice, Atlanta Journal-Constitution, March 9, 2007.
Harvard Law School professor Lucian Bebchuk said that in 2003, the average CEO got about 500 times as much pay as the average worker, compared with a multiple of 140 in 1991. "An expression of widespread shareholder dissatisfaction would provide a valuable signal to the board," Bebchuk said. "The fact that the outcome of the vote would be publicly known would apply some pressure on the board to take the shareholders' preferences into account."
Lawmakers Divided Over Exec Comp Bill, The Daily Deal, March 9, 2007.
Witnesses expressed diverging opinions on the incentive that pay packages provide CEOs to instigate mergers that may not be in the best interest of shareholders or corporations. In an interview, Harvard Law School professor Lucian Bebchuk said that in the past CEOs' interest in keeping their jobs may have led them to avoid value-creating transactions. But severance packages now are so large that executives routinely agree to transactions that don't make sense.
CEO Pay Flap Reaches House, CNN Money, March 8, 2007.
Investors have serious and legitimate concerns about executive pay structures, Lucian Bebchuk, a professor at Harvard Law School, said at the hearing before the House Financial Services Committee.
'Say-on-pay' Proposal to Get House Airing, Bill Would Allow Shareholders an Advisory Vote on Exec Pay, MarketWatch, March 7, 2007.
Rep. Barney Frank's long been saying that shareholders should have a say on corporate executives' pay. On Thursday, the House committee that Frank chairs will hold a hearing regarding a bill that would allow shareholders just that. ... Witnesses scheduled for Thursday's hearing include Harvard Law School professor Lucian Bebchuk, Corporate Library editor Nell Minow and Business Roundtable president John Castellani. No sitting corporate officers are on the witness list.
Shareholder Control and Corporate Boards, Washington Post, March 2, 2007.
Professor Lucian Bebchuk of Harvard Law School is a tireless promoter of "shareholder democracy." In an article about to be published in the Virginia Law Review, he continues his quest to paint shareholders as the helpless victims of greedy, incompetent managers by arguing that shareholders cannot control who sits on the boards of public corporations. The solution, Bebchuk argues in "The Myth of the Shareholder Franchise," is to breathe life into shareholders' voting rights by changing the rules of corporate law to allow disgruntled shareholders to vote out directors more easily.
Informer, Forbes, March 12, 2007.
A new Harvard study suggests public companies led by chief executives who get the highest percent of the total compensation pot paid to their firm's five top people, trade for lower multiples of replacement value and later underperform even more. Yet, write Lucian Bebchuk, Martijn Cremers and Urs Peyer after eyeing 1,000 stocks from 1993 to 2004, the big bosses' "pay slice" rose during that time by a tenth, to 36.3%. The profs opine little about their take but call the stats "worthy of financial economists' attention."
Fannie Mae Will Not Pay $44.4 Million to Executives, Reuters, February 20, 2007.
Fannie Mae will not pay $44.4 million budgeted for executives who led the mortgage finance company during years of faulty accounting, the company said in a regulatory filing on Tuesday... In this case, returning pay might be proper and not a slight on the executives involved, said Lucian Bebchuk, the director of the corporate governance program at Harvard Law School. "This follows the principle that if was not earned it must be returned," he said. Because the bonuses were tied to earnings that ended up being flawed, he said, "It is not necessarily the executive's fault that the money should be returned."
Market, Not Taxes, Should Dictate Pay, Daily Report, February 19, 2007.
The increase in executive compensation has hardly been an unrelenting upward trend in recent years. Actually, top executive pay moved downward for three years after 2000, before recovering slightly in tandem with the stock market in 2004. According to one report from the Cato Institute, "chief executive officer pay from the top 100 in Forbes & fell 54 percent from 2000 to 2003." And Mr. Trotter's own sources, Lucian Bebchuk and Yaniv Grinstein, "estimated that among the S&P 500 firms, average CEO pay fell 48 percent from 2000 to 2003."
Executive-Pay Summaries Conceal as They Reveal: New Proxy Tables Don't Include All Options Data, Washington Post, February 16, 2007.
"There are still problems . . . but this reporting season, we will know much more about both the amount and the structure of compensation than we've known for a long time," said Lucian Bebchuk, director of the Program on Corporate Governance at Harvard Law School.
Tax Plutocrats to Restrain Their Pay, Daily Report, February 13, 2007
There has been a great deal of talk lately about the compensation of executives of publicly owned companies in the United States, including how to control the size of executive salaries and termination payments. … A 2005 study by Lucian Bebchuk of the Harvard Law School and Yaniv Grinstein of the Cornell University School of Management found that the aggregate compensation of the top five executives of all of the publicly owned companies in the United States from 2001 to 2003 was $92 billion, and that the ratio of the aggregate top-five compensation to the aggregate earnings of these companies increased from 5 percent of earnings in 1993 to 1995 to 10 percent in 2001 to 2003.
Can CEO Pay be Brought Down to Earth?, Associated Press, February 9, 2007.
Frank pointed to research done by Harvard professor Lucian Bebchuk showing that compensation of the top five officers at the country's public companies between 1993 and 2002 totaled about $250 billion - nearly 10 percent of aggregate profits. CEO pay grew by a median 11.29 percent in 2005, according to The Corporate Library, which tracks governance, compensation and performance. Bebchuk, co-author of the book "Pay Without Performance: The Unfulfilled Promise of Executive Compensation," has become a frequently-cited source for information in proxy pay proposals. He's also started filing proposals himself on director pay at companies including Walt Disney Co. and Northrop Grumman Corp.
Roadblocks to Greater Say on Pay, New York Times, January 21, 2007.
After receiving a proposal from Lucian Bebchuk, director of the Program on Corporate Governance at Harvard, Home Depot recently changed its bylaws to require that any decision relating to compensation of the company's chief executive be approved by two-thirds of the independent directors of its board. "It would be desirable to ensure," Mr. Bebchuk's proposal stated, "as the proposed arrangement would seek to do, that the corporation does not provide a C.E.O. package that cannot obtain widespread support among the corporation's independent directors." ... Mr. Bebchuk has submitted similar proposals - requiring approval from three-quarters of the independent directors on chief executive pay - at the American International Group, Bristol-Myers Squibb and Exxon Mobil. It is not yet clear whether the proposals will be put to shareholder votes at those companies.
Power Pay: When the Game is Rigged in Favour of the Boss, The Economist, January 18, 2007.
Warren Buffett has repeatedly used his "letter" to Berkshire Hathaway's shareholders to complain about pay. The "boardroom atmosphere almost invariably sedates [directors'] fiduciary genes," he observed on one occasion. "Collegiality trumps independence." In 2003, with the scandals of WorldCom and Enron still smouldering, the great investor issued a challenge to directors across the country. "In judging whether corporate America is serious about reforming itself, CEO pay remains the acid test," he wrote. "To date, the results aren't encouraging." … The board's inability to stand up to the incoming chief executive is an example of a more general spinelessness documented by Lucian Bebchuk and Jesse Fried, of Harvard Law School and the University of California at Berkeley. Boards are agents, too, and Messrs Bebchuk and Fried believe that their interests are more closely aligned with those of powerful executives than with those of the owners they are supposed to represent. As a result, the bargaining over pay is not at arm's length and boards conspire with executives by providing all sorts of "stealth pay" that disguises the true extent of their rewards.
CEO Pay Goes for the Platinum Helicopter, Sydney Morning Herald, January 15, 2007.
Professor Lucian Bebchuk, director of the Harvard Law School's program on corporate governance, has studied the granting of backdated options and excessive executive pay. He found that both were linked to governance problems in companies. In a study with Yaniv Grinstein called Lucky CEOs, Bebchuk found that so-called lucky grants of options - those where backdating had not been proved, but where the options were granted on a day when the share price was low - were linked to companies where the board lacked a majority of independent directors.
Study Links Options Backdating to Corporate Governance Weaknesses, Social Funds, January 12, 2007.
Now Harvard Professor Lucian Bebchuk and colleagues have taken the next step of correlating option manipulation with corporate governance strength (or, more precisely, weakness.) This is the same connection asserted by the socially responsible investing (SRI) community in demanding option expensing as a form of strong governance. Also, Prof. Bebchuk and Yaniv Grinstein from Cornell and Urs Peyer from INSEAD introduce a new method for identifying what they facetiously call "lucky" options--those granted at the lowest price of the month (and hence guaranteed to rise in value.)
How Apple Got Tangled Up with Options, Time, January 11, 2007.
Anyone familiar with Macworld knows that Steve Jobs is secretive. It's part of his allure. But that mystique has taken a hit over revelations that the company backdated options. ... Apple is hardly alone in backdating. Nearly 30% of U.S. companies manipulated options grants to executives between 1996 and 2005, and more than 200 companies have been implicated in options scandals. "Opportunistic timing in options is not unique," notes options expert Lucian Bebchuk, director of Harvard law school's program on corporate governance.
Apple Chief Benefited From Options, Records Indicate, Washington Post, January 11, 2007.
Apple Inc. chief executive Steve Jobs confirmed his place this week as the premier impresario of the Internet age, taking the stage in San Francisco to unveil a smart phone that won a raucous endorsement from thousands of fans in the audience and sent Apple stock rocketing to a record high... Lucian Bebchuk, director of Harvard Law School's program in corporate governance, said Jobs falls into a category of chief executives that Bebchuk has labeled "super-lucky." These are the people who have received stock options on dates representing the lowest price of the financial quarter. "He has some company. He is not the only one to be as fortunate," Bebchuk said. He and his fellow researchers found in a study released two months ago that about 1,000 CEO grants from 1996 to 2005 fell into this category. For most of these options, he said, the dates were more likely to have been the result of "manipulation" rather than good fortune.
Stock Options Backdating Issue Haunts Jobs, USA Today, January 9, 2007.
When Steve Jobs steps to the podium Tuesday at the Macworld Conference here to introduce what is expected to be the newest Apple iPod, he won't be just another CEO hawking a fad product. ... According to data from Thomson Financial, Jobs has never sold shares of Apple stock for profit. His one sale of stock last March - in which he returned 4.5 million shares to the company for nearly $300 million - was to satisfy tax withholding requirements. But Lucian Bebchuk, director of Harvard Law School's program on corporate governance, says that Jobs clearly gained from the favorable backdating. Even if one accepts Apple's explanation that Jobs didn't benefit because his options were canceled, the options' replacement with a grant of restricted stock meant they were worth something, Bebchuk says.
Is Legendary Apple CEO on the Way Out?, Boston Globe, January 8, 2007.
Apple Computer Inc.'s chief executive, Steve Jobs, is expected to captivate an audience of thousands at San Francisco's Moscone Convention Center tomorrow as he unveils Apple's newest products at the company's annual trade show. ... Jobs's renowned perfectionism and his love of elegant design are credited for most of the company's success. That's why Apple investors and the company's board are desperate to shield Jobs from the scandal, said Lucian Bebchuk, director of the Program on Corporate Governance at Harvard Law School. ... "It's clear that the board very much wanted him to stay," Bebchuk said. "The market likes an outcome under which he can stay."
Inside Jobs, Wall Street Journal, January 6, 2007.
An op-ed by Professor Lucian Bebchuk: Apple Computer announced a week ago the conclusions of a special board committee that examined the "improper dating" of over 6,000 option grants during 1997-2002. The committee found no basis for having less than "complete confidence in [CEO] Steve Jobs and the senior management team," placing full responsibility for past problems on the company's former CFO and general counsel. But the company's report fails to dispel concerns about Apple's governance.
It Pays to Simplify Boardroom Compensation, Financial Times, January 5, 2007.
Investors should be forever grateful to Robert Nardelli, the chief executive of Home Depot who has just walked off with a $210m severance package in exchange for years of lacklustre share price performance. For while it is galling to see failure so handsomely rewarded, he has at least demonstrated beyond all doubt how the arguments used by corporate America to justify the stock options culture are palpable nonsense... A final myth is that stock options have no cost. They do. It consists of the amount the company gives up by not selling the options to outside investors. Happily, accountancy is finally recognising this reality. Lucian Bebchuk and others at Harvard have shown that the cost has been very significant in relation to profits.
An Ousted Chief’s Going-Away Pay Is Seen by Many as, Typically Excessive, New York Times, January 4, 2007.
Robert L. Nardelli's rich compensation and poor performance at Home Depot have long been cited by shareholder activists as a prime example of what they view as excessive executive pay. ... "The company is big, the underperformance is significant and the numbers are very large," said Lucian Bebchuk, a Harvard Law School professor who is an outspoken critic of executive pay. "But each of the pieces that lead to the decoupling of pay from performance are very common to the executive compensation landscape."
America's CEO Pay May Soon Face Squeeze, The Christian Science Monitor, January 4, 2007.
The pay packages of America's CEOs still include enormous stock options, rich pensions, and other perks of a Learjet lifestyle. But pressure from investors and regulators is exerting some new restraint on controversial compensation practices. ... During the years 2000-02, those executives took home 12.8 percent of company profits, a figure that has since edged down a bit, according to research by Lucian Bebchuk of Harvard University and Yaniv Grinstsein of Cornell University.
Civility at Harvard, Corporate Board Member Magazine, January 3, 2007.
Intellectual wrangling is the norm at Harvard, and it's not uncommon for professors to continue arguing the finer points of issues that they've debated for years. So it's news of the man-bites-dog variety that two of the biggest names on the faculty, on opposite sides of a particular issue, decline to be drawn into a spat. In one corner is the business school's Jay W. Lorsch, 74, whose off-campus work includes board service at CA, formerly Computer Associates, a software company that was hit by a major accounting scandal in 2004. In the other is the law school's Lucian A. Bebchuk, 51, a part-time corporate reformer whose target list includes CA. In 2006 Bebchuk proposed a bylaw change that, among other things, would require a unanimous vote by CA directors to extend the life of a poison pill.
The 'Corporate Democracy' Oxymoron, Wall Street Journal, January 2, 2007.
The SEC is huddling on whether to facilitate direct shareholder nomination of directors through a new interpretation of its shareholder proposal rule. A prominent professor at Harvard Law School, Lucian Bebchuk, proposes, among other democratizing moves, amending state corporation laws to encourage contested elections for board members. There is ongoing controversy about whether mutual funds are making sufficient disclosure to investors of how they vote on various portfolio corporate matters. And European corporate governance circles are in a dither because the EU failed in a recent directive to qualify the usual one-share-one-vote rule with something approaching one-shareholder-one-vote. The list could be expanded considerably. (Subscription required.)

2006

Compensation Experts Offer Ways to Help Curb Executive Salaries, New York Times, December 30, 2006.
Executive compensation issues are tricky; the devil is often deep in the footnotes of proxy statements, employment agreements and stock option plans. It will take a concerted effort by both investors and boards to effect real change. Otherwise, lawmakers have threatened to get involved. "It's not like Iraq, where everybody says it is bad, but nobody says what to do," said Lucian Bebchuk, a Harvard Law School professor who has been an outspoken critic of executive pay. "The problem is making the process and the people who play a key role in making the decisions want to make improvements."
Opposing view: Well-paid CEOs enrich U.S., USA Today, December 26, 2006.
Critics, notably Lucian Bebchuk of Harvard, argue that corporate boards are held captive by CEOs, who essentially dictate their own pay. Actually, though, rising pay has coincided with a trend toward more powerful and independent boards.
Just Capitalism, The Washington Post, December 22, 2006.
What proportion of bosses' pay should be regarded as excessive? In a paper published last year, Harvard's Lucian Bebchuk and Cornell University's Yaniv Grinstein take a careful look at this question. They begin by noting that executive pay was already raising eyebrows back in 1993 and that it has nonetheless grown mightily since then. Then they observe that sales and profits of top companies have risen, which would tend to cause the bosses' pay to rise in tandem; and that an increasing share of the top companies are new-economy outfits, which tend to pay more. By analyzing the statistical relationship between executive pay and firms' size, profits and product mix, Mr. Bebchuk and Mr. Grinstein calculated how much compensation could have been expected to rise between 1993 and 2003. Their result: In 2003 the top five executives at the average public company could have been expected to earn a collective $6 million-but they actually received almost twice that.
Will Backdating Scandal Thwart Effort to Roll Back Reforms?, Wall Street Journal, December 20, 2006.
Clearly, something's amiss in the orchard. A new study out this week helps explain what that might be. Three scholars -- Lucian Bebchuk, Yaniv Grinstein, and Urs Peyer -- have run the numbers on 29,000 grants of stock options to directors, and found that 9% of them were "lucky" -- that is, they occurred on a day when the stock price hit a monthly low. "Lucky" is in quotes, because the authors clearly believe that many, if not most, were the result not of luck but of backdating.
US Options Scandal Derails S&N Deal, The Guardian, December 19, 2006.
Clearly, something's amiss in the orchard. A new study out this week helps explain what that might be. Three scholars -- Lucian Bebchuk, Yaniv Grinstein, and Urs Peyer -- have run the numbers on 29,000 grants of stock options to directors, and found that 9% of them were "lucky" -- that is, they occurred on a day when the stock price hit a monthly low. "lucky" is in quotes, because the authors clearly believe that many, if not most, were the result not of luck but of backdating.
Op-Ed by Lucian Bebchuk and Urs Peyer: 'Lucky' Grants Point to a Deeper Governance Malaise, Financial Times, December 18, 2006
Backdating Not Limited To Execs: Study, Securities Law360, December 18, 2006.
"This paper shows that opportunistic timing problems have not been limited to executives' grants, as has been thus far assumed, but rather have also affected outside directors' grants," wrote co-authors Lucian Bebchuk of Harvard Law School, Yaniv Grinstein of Cornell University and Urs Peyer of Insead business school in France.
Get Ready For A Red-Hot Proxy Season, Forbes, December 18, 2006.
If the 2006 proxy season felt dramatic, just wait until spring. The folks with their fingers on the pulse of big shareholder groups have already identified the top five areas of activity this year: majority voting, executive compensation, board declassification, poison pill elimination and activist hedge funds. ... Meanwhile, the movement toward board declassification has gathered so much momentum that Connolly advised companies not to waste their resources fighting it. Already, 53% of publicly traded companies have declassified boards, and last year saw 94 proposals. Academic studies by Harvard's Lucian Bebchuk and others correlate staggered boards with lethargic stock performance, and shareholders have taken notice. Connolly thinks they have simply concluded that a classified board has no benefits for them as owners.
Study Cites Role Outside Directors Had With Options, Wall Street Journal, December 18, 2006.
A new academic study suggests that many outside directors received manipulated stock-option grants, a finding that may help explain why the practice of options backdating wasn’t stopped by the boards of some companies. The study is notable because it suggests that outside, or independent, directors -- who are supposed to play a special role safeguarding against cozy board relationships with management -- may have been co-opted in options backdating by receiving manipulated grants themselves. The New York Stock Exchange requires that a majority of board seats, and all compensation- and audit-committee members, be independent. The study doesn’t address whether directors were aware that their options were propitiously timed… Lucian Bebchuk, a law professor at Harvard, said the study didn't calculate how much extra money outside directors may have received by exercising options with fortuitous grant dates. "We don’t expect the numbers to be very large," he said. "Directors don’t get very large grants."
Study Finds Outside Directors Also Got Backdated Options, New York Times, December 18, 2006.
Board members were not just blissfully ignorant or willfully blind bystanders when they backdated stock option grants for corporate executives, according to a new study. Some 1,400 outside directors themselves may have received manipulated grants over the past decade. The research, to be released today, sheds new light on the stock options manipulation that has entangled more than 120 companies in a nationwide scandal. It suggests that what has been widely seen as a dot-com phenomenon to enrich managers in the executive suite probably extended to directors in the boardroom as well. The study, sponsored by the Harvard Law School Program on Corporate Governance, also raises serious questions about corporate governance if the outside directors, who are supposed to act as a final backstop against bad practices, received — and in many cases may have even approved — fraudulent option grants. "Opportunistic timing of directors’ grants is unlikely to have large dollar significance," said Lucian A. Bebchuk, a Harvard Law School professor who is one of the study’s three authors. "But it has a large governance significance."
'Lucky' Stock Options Not Limited to Executives, Washington Post, December 18, 2006.
Chief executives weren't the only ones enjoying near-guaranteed profits from stock options in the past decade. Outside directors at hundreds of American companies also received option grants that are likely to have been manipulated, a new study found. According to the study, 9 percent of 29,000 option grants to outside directors from 1996 to 2005 were granted on a day when the company stock price was at a monthly low. The likelihood of such a concentration of "lucky" grants is so low as to be statistically impossible, the study’s authors said. "It’s like going to Vegas thousands of times and betting on red every time and winning more than half the time,’ said Lucian Bebchuk, the Harvard University professor who co-authored the report, titled "Lucky Directors," with Cornell University’s Yaniv Grinstein and Urs Peyer, a professor at the French business school Insead. "From a numerical standpoint, it can’t be random. There has to be some manipulation of the outcome."
Doubt Cast on Stock Options of Directors, LA Times, December 18, 2006.
Nearly 1,400 corporate board members appear to have profited from the manipulation of stock option grant dates over a 10-year period, according to a study being released today. The analysis raises the possibility that hundreds of board members were aware that options were backdated to boost their value to themselves and company executives. That could be seen as a conflict with their role as advocates for all company shareholders. "Rather than merely failing to notice or stop the manipulation of executives’ grants, many outside directors have received manipulated option grants and thus directly benefited from the manipulation practices," according to the study by Harvard professor Lucian Bebchuk and two other scholars.
Study Links Directors to Options Scandal, Financial Times, December 18, 2006.
More than 1,000 directors of US companies have benefited from the controversial practice of backdating stock options to boost their pay, according to new research set to open another front in a scandal that is spreading rapidly across corporate America…The study by three academics - to be published today- is the first to provide evidence that options of outside directors were backdated in the same way as the ones awarded to chief executives. It could prompt regulators and companies to widen their probes to include backdating by directors. The study, by Harvard Law School's Lucian Bebchuk, Cornell Universit’s Yaniv Grinstein, and Insead’s Urs Peyer, found that about 1,400 directors at 460 US companies benefited from stock options backdated to the lowest price in a monthly period. (Subscription required.)
Options Backdating Frequent, Report Says, Associated Press, December 18, 2006.
About 1,400 corporate directors received option grants whose timing was manipulated, according to an academic study released Monday. Of all options grants to directors, about 9 percent were received at "lucky" times _ when the stock price was equal to a monthly low, according to a Harvard Law and Economics paper released Monday. After studying the period form 1996 to 2005, academics at Harvard Law School, Cornell University and INSEAD in France estimated that about 800 lucky grant events were the result of opportunistic timing. The report was written by Lucian Bebchuk at Harvard, Yaniv Grinstein at Cornell and Urs Peyer at INSEAD.
N.C.-Based Company Rewards CEO for Paying Off His Debt to Firm, Dow Jones/Associated Press, December 15, 2006.
Lucian A. Bebchuk, Harvard Law School professor and director of its corporate governance program, said that he had never encountered an executive bonus that took into account the recipient's payback of loans, and he called individual debt reduction "a very funny performance measure."
Firm Rewards CEO for Paying Off His Debt, Houston Chronicle, December 14, 2006.
How about a bonus for paying off your debt to the company? That’s the unusual compensation arrangement Speedway Motorsports Inc. set up for its chief executive. Part of Chairman and Chief Executive O. Bruton Smith’s $1.45 million bonus for 2006 was based on the fact that he repaid some of the money he’s owed his company for at least four years, according to a recent filing with the Securities and Exchange Commission. This has compensation experts puzzled. … Lucian A. Bebchuk, Harvard Law School professor and director of its corporate governance program, said that he had never encountered an executive bonus that took into account the recipient’s payback of loans, and he called individual debt reduction "a very funny performance measure."
Study Ties CEO's Clout, Backdating, The Atlanta Journal-Constitution, December 14, 2006.
Corporations that systematically backdated stock options were headed by strong chief executives who influenced boards that had a minority of outside, or independent, directors, a new Harvard Law School research report suggests. … "We estimate that about 10 percent of all CEOs and about 12 percent of all companies engaged in backdating," research leader Lucian A. Bebchuk said in a telephone interview. The options were usually dated from the stock’s lowest price in the grant month, but about 43 percent of the grants studied were awarded from the lowest price of the quarter, the research found…But historically, backdating was an issue waiting to surface as a controversy. It was discovered in the 1990s by academic researchers who noticed that the coincidence of options grants to subsequent share price gains of certain executives was statistically suspect. And that's basically what Bebchuk and his researchers — Yaniv Grinstein and Urs Peyer — looked at. They studied the options practices of 6,000 public companies from 1996 through 2005.
The FSA may be no Easy Pushover for Nasdaq, Financial Times, December 10, 2006.
Most of the corporate scandals arose – with the notable exception of Enron – at companies where the roles of the chief executive and chairman were combined. The imperial CEO’s accountability to shareholders is weak. Huge stock option grants, which provided these individuals with an increased incentive to cook the books, were not subject to a UK-style shareholder vote. Meanwhile, a new Harvard paper by Lucian Bebchuk, Yaniv Grinstein and Urs Peyer tells us that "lucky grants" of backdated options were more likely when the company lacked a majority of independent directors and/or the CEO had longer tenure – factors both associated with increased influence of the CEO on pay-setting and board decision-making. Not all the news is bad, though. The Scott Committee on capital markets regulation last week retracted its endorsement of ballot stuffing by brokers in director elections, under pressure from its more shareholder-friendly members. And its other proposals on shareholder rights will be hard to ignore.
'Lucky' Option Grants Detailed; Study Points to Manipulation, Boston Globe, December 9, 2006.
About 1,150 options granted to chief executives at the lowest stock price of the month were the result of manipulation, according to estimates in a Harvard Law and Economics paper released yesterday. The study looked at "lucky" grants, which it defined as grants given to chief executives at a stock's lowest price for the month...The study was done by Lucian Bebchuk of Harvard Law, Yaniv Grinstein of Cornell University, and Urs Peyer of the INSEAD business school in France.
CEO Thievery Triggers Shareholder Outrage, Investment News, November 27, 2006.
Meanwhile, an independent board reduced by 33% the chance that a company would be involved in the backdating of stock options, the study concluded. The study, by Harvard University professor Lucian Bebchuk, Ithaca, N.Y.-based Cornell University professor Yaniv Grinstein and visiting University of Chicago professor Urs Peyer, examined stock grants between 1996 and 2005. It's the latest in a series of papers by academic and governance research groups that attempt to measure the extent of the backdating scandal and to explain how it spread.
Let's all Get Rich by Backdating Everything, Miami Herald, November 27, 2006.
A study by Lucian Bebchuk, a Harvard law professor, and Yaniv Grinstein, a Cornell management professor, concluded 12 percent of firms they looked at provided "lucky grants'" of manipulated option dates between 1996 and 2005.
Is Blackstone Setting a Bridge Too Far?, Wall Street Journal, November 25, 2006.
Harvard professor Lucian Bebchuk, a critic of executive compensation trends, calculates that senior managers receive up to 10% of after-tax profits in any single year. On this arithmetic, companies could save as much by outsourcing 100 top management jobs to India as by eliminating 10,000 workers. But America's club of corporate executives won't be looking too closely at this form of outsourcing.
Backdated Awards Added 10% to Executive Pay, The Independent, November 18, 2006.
Lucky CEOs, a paper by Lucian Bebchuk, Yaniv Grinstein and Urs Peyer, examined the effect of particularly suspicious, or "lucky", share options grants. The authors say it is wrong to assume that options backdating has been a technical or trivial issue. "We estimate the average gain to chief executives from grants that were backdated to the lowest price of the month to exceed 20 per cent of the reported value of the grant. The gain increases the CEO's total reported compensation for the year by more than 10 per cent."
Study Charts Broad Manipulation of Options, New York Times, November 17, 2006.
Abuses of stock option grants are perceived to have spread like a virus among high-technology companies. But a new study suggests that hundreds of old-economy companies may also have caught the backdating bug. ... "It is not the case that people should concentrate on new-economy firms," said Lucian Bebchuk, a Harvard Law School professor and director of its corporate governance program. "That is the impression that one might get from the cases that have come under scrutiny thus far." Professor Bebchuk co-wrote the study with Yaniv Grinstein, a Cornell University professor, and Urs Peyer of the French business school Insead. It is to be posted today on the Web site of the Harvard Law School corporate governance program.
Backdated Options Pad CEO Pay By Average of 10%, Wall Street Journal, November 17, 2006.
About 850 U.S. chief executives received backdated or otherwise manipulated stock option grants that boosted their annual pay, on average, by at least 10%, according to a new study. ... The researchers also found that executives who reaped riches from backdating options started out with reported compensation that was richer than their peers at similar companies. On top of that above-average pay, executives received an average of an extra $1.3 million to $1.7 million through each manipulated grant, the academics found. "It's not pocket change," said Lucian Bebchuk, a professor of law, economics and finance at Harvard and one of the study's authors.
More Than Backdating in Common, Washington Post, November 17, 2006.
Companies that lacked a majority of independent board members and that had long-serving chief executives were more likely to award questionably timed stock options to senior executives, according to a study to be released today. ... In addition, Harvard University professor Lucian Bebchuk said, companies in the study that were implicated in backdating already paid their top executives high cash compensation, which was increased by backdated options by more than 10 percent a year on average.
A Board Link to Option Timing, Los Angeles Times, November 17, 2006.
Backdating of stock options was more likely to occur at companies that did not have independent board directors in the majority, according to a study being released today. ... An independent board - one on which the majority of members were not insiders nor had other business dealings with the company - reduced by 33% the chance that a company would provide lucky grants to its chief executives, said Lucian Bebchuk, a Harvard professor and a coauthor of the report.
Study Hits Out at Options Practice, Financial Times, November 17, 2006.
The controversial practice of backdating stock options to boost executive pay went hand-in-hand with poor corporate governance practices and overbearing chief executives, according to a study published today. The research is the first to posit a link between lax internal controls and stock options backdating. The scandal has so far engulfed more than 130 US companies in internal and regulatory probes but the study suggests that number could eventually climb to 720…"These findings are consistent with the view that grant date manipulation reflects governance problems rather than a compensation device used for valid business reasons," conclude the report’s authors - Harvard Law School’s Lucian Bebchuk, Yaniv Grinstein from Cornell University and INSEAD’s Urs Peyer."
Sarbanes-Oxley Likely To Stand With Democrats, Investor’s Business Daily, November 8, 2006.
Regulatory changes, however, are unlikely to be sweeping or surprising, observers said, as legislators have already tipped their hand by introducing policies to regulate hedge funds and expose excessive executive compensation. "My assessment is that it's not going to create a major shift," said Lucian Bebchuk, director of the Harvard University Program on Corporate Governance. However, Democrats will be able to slow the momentum for rolling back previous reforms, he said.
Grasso Pension Ruling Puts Boards on Notice, U.S. News & World Report, October 20, 2006.
And the judge's ruling that Grasso had a duty to inform his board about his big pension account could have implications for executives at all kinds of businesses, says Lucian Bebchuk, a Harvard law professor and expert on executive pay.
Investors Press Their Demands, National Law Journal, October 9, 2006.
In another high-profile ballot-access case claimed as a shareholder win, the plaintiff was shareholder-power advocate Lucian Bebchuk, a Harvard Law School professor and director of Harvard's Program on Corporate Governance. As a shareholder of CA Inc., formerly Computer Associates, Bebchuk proposed a bylaws amendment involving the way the company adopts a poison pill. The company declined to put the proposal on the proxy, saying that the bylaw would violate Delaware law.
The $100 million CEO club: Rewarding execs with big stock options made many a millionaire in the 90’s, Forbes, October 3, 2006.
It may be time for firms to change the way they distribute equity awards. Firms could tie options more closely to performance by forcing executives to hold them longer, says Lucian Bebchuk, a professor at Harvard Law School and author of Pay Without Performance: The Unfulfilled Promise of Executive Compensation.
Activist Shareholders Outfoxing Top Execs, Investor's Business Daily, October 2, 2006.
The growing power of shareholders in takeovers was highlighted in September when Harvard Law School professor Lucian Bebchuk persuaded the Delaware Chancery, the most sophisticated corporate law court in the U.S., to let him include a proposal on the proxy of computer services giant CA, (CA) formerly Computer Associates. Bebchuk, holding just 140 CA shares, wanted to change the company's bylaws so that poison pills would require shareholder approval or unanimous board approval.
HP spying scandal back in the spotlight, Financial Times, September 27, 2006.
Lucian Bebchuk, a professor at Harvard Law School, says efforts to clear the air have been complicated by Mr Hurd's decision to engage Morgan Lewis, attorneys, to lead an investigation into the scandal. Mr Hurd surprised observers last week when he announced that the firm's investigation had been reporting to him, rather than to the HP board. Prof Bebchuk says that Mr Hurd's decision to have the investigation report to him when the questions remain about the extent of his involvement in the scandal presented a conflict of interest, even if he felt he had no choice in the face of a dysfunctional board.
Ruling May Open Access to Proxies, LA Times, September 8, 2006
This can make a significant difference in the process of corporate elections, making them somewhat more real than they have been in the past," said Lucian Bebchuk, a Harvard professor who specializes in corporate governance issues. "It makes it possible to remove directors without expending huge costs.
Executive Pay Practices Under Scrutiny, BusinessWeek, September 5, 2006.
The end run around Section 162(m) may have cost the federal government billions of dollars in lost taxes since the rule was enacted 13 years ago. Harvard Law School Professor Lucien Bebchuk estimates that forgone taxes as a result of widespread abuse of 162(m) has cost the U.S. Treasury at least $20 billion. "The numbers are gigantic," he says.
Delaware Rules: Heated debates over governance, director independence, and executive pay will likely be resolved in Delaware's Chancery Court, CFO Magazine, August 1, 2006.
Wachtell Lipton's Martin Lipton, the inventor of the poison-pill defense in the 1980s, worries too about the impact if Delaware courts rule for Harvard University professor Lucian Bebchuk in a current case. As a shareholder of CA Inc., Bebchuk is suing the company as part of a campaign to get companies to allow binding stockholder votes. His proposal would let shareholders change antitakeover provisions of company bylaws to require a unanimous vote of directors and force poison pills to expire after one year, unless holders approve their extension. Some companies approved similar proposals from Bebchuk, but CA responded that the amendment violates Delaware law.
Op-Ed by Lucian Bebchuk: Investors Must Have Power, Not Just Figures on Pay, Financial Times, July 27, 2006
New Rule to Expose Pay Packages, USA Today, July 27, 2006.
"The iceberg of retirement benefits will very much come to the surface," says Harvard University law professor Lucian Bebchuk, co-author of the book Pay Without Performance and a critic of "stealth compensation" he sees in the form of deferred compensation, pensions and assorted perks.
More Data on Pay at the Top Is Mandated, LA Times, July 27, 2006.
"Paradoxically, it will seem as if pay levels are going up and there is an increase in performance-decoupled pay," said Lucian Bebchuk, a professor at Harvard Law School. "That's not because things are getting worse. We are just going to learn about things that have been bad for some time. They will come to the surface."
Retaking the High Ground, Investment Dealers' Digest, July 24, 2006.
The short-term versus long-term debate is sometimes not as clear-cut as it seems. For example, Lucian Bebchuk, a professor at Harvard University, has advocated majority voting instead of the plurality vote that many US companies have. He argues that it is easier to manipulate the outcome of a vote in a plurality system, in which a director can be elected with as little as one vote. Majority voting, on the other hand, would help ensure that the goals of activists were aligned with other shareholders, since a large block would have to be convinced that the new way makes sense.
Dancing Delicately in Delaware: Wilmington's balancing act continues as corporations and shareholders face off, and examining the merits of outsiders as CEOs, The Daily Deal, July 21, 2006.
In Lucian Bebchuk v. CA Inc., Vice Chancellor Stephen Lamb studiously declined to rule on the legality of a bylaw that seeks to limit the CA Inc. board's ability to keep a poison pill in place because shareholders of the Islandia, N.Y., computer products distributor had not yet approved it. CA has resisted putting the proposal on its ballot, claiming that such a bylaw would be illegal under Delaware law. Lamb held that Bebchuk, a Harvard Law School professor and longtime critic of poison pills, could pursue his case before the Securities and Exchange Commission or in the federal courts. The extent to which shareholders may bind a board by passing bylaws has been a key bone of contention between shareholder activists and corporations.
Bebchuk's Crimson Tirade, Institutional Investor, July 15, 2006.
For two decades, Harvard Law professor Lucian Bebchuk has been an outspoken voice for shareholder rights, railing in books and interviews against the excesses of entrenched corporate executives and directors. Now he's no longer just a commentator - he's a combatant.
What the boss makes; Compensation By the numbers, Seattle Times, July 9, 2006.
"Flawed compensation arrangements have not been limited to a small number of 'bad apples'; they have been widespread, persistent and systemic," wrote professors Lucian Bebchuk of Harvard Law School and Jesse Fried of the Boalt Hall School of Law at the University of California, Berkeley, who co-authored "Pay Without Performance: The Unfulfilled Promises of Executive Compensation."
Corporate Funding For Shareholder Activism? Critics Cite Strategic Issues, But Backers See Fairer Game; Judge Offers a Compromise, Wall Street Journal, July 3, 2006.
Harvard Law School Prof. Lucian Bebchuk counted only 108 challenges for board seats, excluding hostile-takeover attempts, at U.S. companies between 1996 and 2004. Thirty-eight challengers won, but only two at companies with market capitalizations greater than $200 million. For medium-size and large companies, he says, "the risk of removal via the ballot box is practically negligible."
CA to Add Shareholder Proposal to Proxy, Associated Press, June 27, 2006.
The Islandia, N.Y., technology company originally denied a request to add the proposal to its upcoming proxy statement, claiming the proposal was a violation of Delaware law. The rejection resulted in a court challenge by the drafter of the resolution, Harvard professor and shareholder rights activist Lucian Bebchuk.
Islandia-based CA to Include Poison Pill Provision in Its Proxy, Long Island Business News, June 27, 2006.
The Islandia-based software company had previously fought corporate governance expert Lucian Bebchuk's attempt to include a bylaw amendment on CA's proxy - due in July, a month before the company's annual meeting. The proposal, part of a growing trend of greater shareholder involvement, directly challenged corporate policy of leaving bylaw decisions in the hands of directors.
Sky-High Payouts To Top Executives Prove Hard to Curb, Wall Street Journal, June 26, 2006.
Yet, because CEOs have influence over who gets on the board -- the only board slate offered to shareholders is the one proposed by management - directors are careful not to offend them. "Displeasing the CEO hurts one's chances of being put on the company slate, so directors have an incentive to support or at least go along with pay arrangements that favor top executives," says Lucian Bebchuk, a Harvard University law school professor and co-author of "Pay Without Performance." "They don't have an incentive to change those arrangements."
Court Deems CA Shareholder Suit "Not Ripe", Long Island Business News, June 23, 2006.
Vice Chancellor Steven Lamb said Professor Lucian Bebchuk's challenge to CA's proxy was "not yet ripe" for consideration.
Judge Won't Settle CA Poison Pill Dispute, Associated Press, June 23, 2006.
Harvard corporate governance expert Lucian Bebchuk wants to amend CA's bylaws to require a unanimous vote by the board of directors to adopt or extend a "poison pill" antitakeover plan, and to set a one-year expiration date for any such plan. Any attempt to repeal or amend the bylaw also would require a unanimous board vote.
Judge Says Fight on CA Poison Pill Proxy Not Ready for Decision, MarketWatch.com, Jun 23, 2006.
Vice Chancellor Stephen Lamb said the battle between CA and Harvard Law professor and shareholder rights activist Lucian Bebchuk is not ripe for decision yet.
Congress must increase minimum wage, protect average investors, Journal Times On Line, June 22, 2006.
A recent study by Harvard's Lucian Bebchuk and Cornell's Yaniv Grinstein found that in 1993 the total compensation for the top five executives of American public companies made up 4.8 percent of company profits. Just ten years later that proportion had more than doubled to 10.3 percent and the total amount paid to executives over that period was approximately $290 billion.
What Price Talent? Why US investors are now less content to hail the chief, Financial Times, June 16, 2006.
But academic and empirical evidence suggests that this ideal can be difficult to realise, given the ties between independent directors and management. Professors Lucian Bebchuk and Jesse Fried, who analysed the issue in their book Pay Without Performance, concluded: "Compensation arrangements have often deviated from arm's length contracting because directors have been influenced by management, sympathetic to executives, insufficiently motivated to bargain over compensation or simply ineffective."
Court to say whether CA holders vote on 'poison pill', MarketWatch.com, June 16, 2006.
Vice Chancellor Stephen Lamb said Friday he would rule before then on whether CA must include a proposal from Harvard Law School Professor Lucian Bebchuk that involves poison pills, a hot-button issue for corporate-governance experts.
Runners and Raiders: Companies are Under Attack Again, This Time from Activist Hedge Funds that Want to Enrich Shareholders, Not Chief Executives, Financial Times, June 10, 2006.
For Lipton, the lessening stigma is partly a consequence of the efforts by some academics and unions to shift the nature of US companies from a "director-centric management system" to a "shareholder-centric" one. This movement, best illustrated by the work of Professor Lucian Bebchuk at Harvard, threatens to replace the "imperial chief executive" with the "imperial shareholder", says Lipton. Combined with the reaction to the wave of corporate scandals at the end of the stock market boom and media coverage of soaring executive pay, their efforts "provide wonderful cover" for activist shareholders. Lipton fears it could ultimately lead to US companies becoming more like UK companies in terms of the active role of shareholders. This, in his view, would be "a disaster" for US companies and "for the economy as a whole".
Canada CEO Pay Doesn't Reflect Stock Performance, Wall Street Journal, June 1, 2006.
U.S. studies of executive pay have found some correlation between higher pay for top executives and better returns for investors, "although not as much as one would like," said Lucian Bebchuk, director of the Harvard Law School corporate governance program. In the U.S., "there is a similarly too-weak link between pay and performance," Prof. Bebchuk said.
Big Bonuses Still Flow, Even if Bosses Miss Goals, New York Times, June 1, 2006.
"Lowering the hurdles is especially disconcerting because very often the goals are not set all that high to begin with," said Lucian Bebchuk, professor at Harvard Law School and author with Jesse Fried of "Pay Without Performance." Mr. Bebchuk said shareholders should be especially alert to increases in bonuses because more companies were shifting away from stock options and into cash incentives
Lawsuit seeks answer on shareholders' power over bylaws, MarketWatch, May 12, 2006.
The lawsuit, filed Thursday afternoon in Delaware Chancery Court on behalf of Harvard professor Lucian Bebchuk asks the courts to decide whether the actions Bebchuk seeks in a shareholder proposal are illegal under Delaware law because they would give shareholders the power to decide on an issue normally governed by directors.
Conflict of Interests Policies and Practices Vary Widely at Proxy Advisory Firms, SocialFunds.com, April 19, 2006.
Harvard Law Professor Lucian Bebchuk, whose resolution calls on Chevron to reimburse shareowner expenses for resolutions receiving majority support, is a minority shareholder of Glass Lewis, serves on its advisory board, and collaborates on its shareholder rights index. Of the six shareowner resolutions up for vote at Chevron, Prof. Bebchuk's is the only one Glass Lewis recommends voting for.
Executive Pay in the U.S.: CEOs Take the Money and Run, Z Magazine, April 19, 2006.
According to a just released study by professors Lucian Bebchuk of Harvard Law School and Yaniv Grinstein of Cornell University, based on interviews of CEOs and top managers at the 1,500 largest publicly traded corporations in the U.S., the group of 5 top managers at the corporations received collectively $122 billion in compensation between 1999-2003 compared to $68 billion for the same group during 1993-1997. On top of these 1999-2003 gains, the Harvard-Cornell study estimates another 39 percent increase in average executive compensation in 2004 for the surveyed group of the largest corporations.
For Leading Exxon to Its Riches, $144,573 a Day, New York Times, April 15, 2006.
"It's a funny thing to call it a pension; basically it's a check of nearly $100 million," said Lucian Bebchuk, director of the corporate governance program at Harvard Law School and the co-author of "Pay Without Performance: The Unfulfilled Promise of Executive Compensation" (Harvard University Press, November 2004).
Shameless Gougers, National Journal, April 14, 2006.
That is a bad thing in itself -- and, fairness aside, the scale of the resulting misallocation of resources is not small. An academic study published last year by Lucian Bebchuk and Yaniv Grinstein in the Oxford Review of Economic Policy estimated that from 2001 to 2003, the total pay of the five highest-earning CEOs of public companies was equivalent to nearly 10 percent of the companies' earnings, roughly double the share of earnings paid out that way from 1993 to 1995. Pay on that scale, if it elicits no improvement in company performance, is perceptibly depressing return on investment. That, as I say, is serious enough, but a far larger cost comes in damage to the system's reputation.
Upstart Investors For Director Accountability Targets Pfizer, MarketWatch.com, April 13, 2006.
While Pfizer doesn't face any shareholder proposals on CEO pay on its next proxy, the preliminary version of its proxy did contain a proposal that urged the company to let shareholders have more say over executive pay. The proposal focused on pension issues, quoting a study by Harvard Law School Professor Lucian Bebchuk that estimated that McKinnell has received about $67 million in total compensation during his tenure as Pfizer's CEO. In contrast, the study estimates the actuarial present value of McKinnell's expected pension benefit to be approximately $71.5 million to $83 million.
CEO Pay Soars in 2005 as a Select Group Break the $100 Million Mark, USA TODAY, April 10, 2006.
Some reformers believe fundamental changes in the way CEOs are compensated won't occur until corporate directors are held more accountable. "They're not sufficiently dependent on shareholders, who lack real power to remove them from boards," says Harvard University professor Lucian Bebchuk, who decries the lack of connection between pay and performance and is pushing for bylaw changes at several firms.
No point griping about CEO pay, The Capital, April 10, 2006.
An oft-cited study by Lucian Bebchuk of Harvard University and Yaniv Grinstein of Cornell University has established that top U.S. executives are clearly taking home a bigger share of the profits at their companies. Mr. Bebchuk and Mr. Grinstein found that the aggregate pay of the top five executives at U.S. companies amounted to 10 percent of the combined earnings at those companies between 2001 and 2003, double the rate of take-home pay eight years earlier.
Smaller Fish Are Also Doing Swimmingly, New York Times, April 9, 2006.
"In proportion to market cap and earnings, C.E.O. pay is much larger at small and midsize companies," said Lucian A. Bebchuk, a professor at Harvard Law School and co-author, with Jesse M. Fried, of "Pay Without Performance: The Unfulfilled Promise of Executive Compensation."
Spotlight on Pay Could Be a Wild Card, New York Times, April 9, 2006.
Lucian A. Bebchuk, the director of the corporate governance program at Harvard Law School who has been sharply critical of many compensation practices, says that at the very least, the near term will reveal more exorbitant pay packages, and that this may provoke a reaction from large shareholders.
AFL-CIO CEO PayWatch Website Offers Sneak Peak at Top 25 Super-Pensions and Publishes Comprehensive New Data on 2005 CEO Pay, Aflcio.org, April 6, 2006.
According to the groundbreaking research of Harvard Law Professor Lucian Bebchuk, the average CEO pension equals more than one third of his or her total compensation. These under-the-radar pensions undermine the goal of linking pay for performance. Data on Executive PayWatch provides concrete examples of how excessive CEO pensions can undermine this goal. Pfizer CEO Hank McKinnell's pension is at the top of the list, with the choice of over $6.5 million annually or a lump sum payment of $83 million in cash. Yet under McKinnell's leadership, Pfizer's stock price underperformed for the last five years; between 2000 and 2005 share value plummeted by nearly half.
Calculating Compensation, Financial Times, April 6, 2006.
In Pay without Performance, Lucian Bebchuk and Jesse Fried examine the issue by comparing executives with star athletes. They argue that while compensation for the latter reflects individual skill and performance, the same rationale should not be applied to executives.
Stock Activism's Latest Weapon, Wall Street Journal, April 4, 2006.
To showcase the power of this rarely used weapon, Lucian Bebchuk, a Harvard law professor best known for opposing high executive pay, has targeted eight companies with bylaw amendments this year. Three companies -- American International Group Inc., Bristol-Myers Squibb Co. and Time Warner Inc. -- already have accepted his proposals or variants. Five others are opposing his proposals, so shareholders will vote on them this spring.
Executive Compensation Linked to Good Corporate Governance, Oil & Gas Financial Journal, April 4, 2006.
Writing in the Wall Street Journal in mid-January when the SEC was taking its initial action to require more information, the head of the Harvard Law School's corporate governance program, Lucian Bebchuk noted billionaire Warren Buffett's observation that executive compensation is the "acid test" of corporate governance. Then, Bebchuk concluded in a column lauding the SEC's latest efforts that more disclosure will only emphasize that much work remains to be done to fix executive compensation.
Shareholders at the Gate, Boards Bow to Activist Pressure as Proxy Season Looms, MarketWatch, March 3, 2006.
The present value of McKinnell’s pension is between $71.5 million and $83 million, according to a study by Harvard Law School Professor Lucian Bebchuk that the AFL-CIO cited in its proposal. That exceeds the $67 million that McKinnell has earned while working at Pfizer.
The AFL-CIO is demanding that Pfizer seek shareholder approval for any senior executive retirement package that exceeds what they earned while working for the company.
When the Blind See Better, Forbes, February 13, 2006.
The combined compensation for the heads of America's 500 biggest companies increased by 54% in 2004. Harvard professor Lucian Bebchuk's calculations show that the top five executives now collect 10% of the average big firm's net income, double the percentage a decade ago. This is a problem that affects not just morale but competitiveness.
SEC's Spotlight on Executive Pay: Will It Make a Difference?, Knowledge@Wharton, February 8, 2006.
And a study by Lucian Bebchuk and Yaniv Grinstein of Harvard found that from 1993 through 2003, executive pay increased to about twice the level that could be explained by factors such as growth in company size and stock performance. In 2003, compensation for top executives equaled 10% of their companies' annual earnings, compared to 5% percent in 1993, the study reported.
Overcompensating, The New Yorker, February 6, 2006.
In part, executive compensation matters to investors because executives now take so much money out of corporations every year. According to the economists Lucian Bebchuk and Yaniv Grinstein, between 1993 and 2003 the top five executives at fifteen hundred companies in the U.S. were paid three hundred and fifty billion dollars. That level of pay makes sense only if it leads to better performance. But plenty of executives are getting superstar pay for journeyman work. For one thing, executives are rewarded far more for good luck in their industry (like rising oil prices that they had no control over) than they are punished for bad luck, according to a study by the professors Gerald Garvey and Todd Milbourn. Though most of their pay is now in the form of stock or stock options, C.E.O.s' cash salaries have also risen sharply over the past decade; in 2005, the average C.E.O. got paid millions literally just for showing up. And lavish perksranging from personal use of the corporate jet to having the company cover the C.E.O.'s income taxes--remain ubiquitous.
A Different Kind of Carrot for our Bosses, Canberra Times, February 2, 2006.
What this means is that executive pay practices in Australia are increasingly moving along US lines, where commentators point to a large "decoupling" of pay from performance. In Pay without Performance: The unfulfilled promise of executive compensation (Harvard University Press, 2004), prominent US law professors Lucian Bebchuk and Jesse Fried point out that in their country, between 1991 and 2003 the average CEO remuneration increased from 140 times the pay of an average worker to 500 times average pay.
Academic Roundup, Manifest-I, February 2, 2006.
Executive Pensions, by Lucian A Bebchuk, Harvard Law School; and Robert J Jackson, Jr, Program on Corporate Governance. NBER Working Paper No. 11907: The authors examine executive pensions in the US and suggest the omission of such figures by the majority of financial economists has led to a sizeable underestimation of executive remuneration.
Keeping up with Mr. Jones, CEO, TCSDaily.com, January 24, 2006.
While more disclosure is nice, and the goal of increasing market transparency is even nicer, the new SEC rule also places an enormous burden on shareholder activists. After all, if shareholders (the rightful owners of the company) realize that they are being ripped off, they must be prepared to discipline the CEO by applying pressure on the board of directors. However, even if shareholders receive comparable, side-by-side numbers on executive compensation, will they really be able to discipline any corporate board that approves an outrageous compensation scheme? Worse yet, if you buy into the "managerial power" model advanced by Bebchuk and Fried, which basically states that managers have stacked the compensation deck in their favor by de-coupling pay from performance and tainting the overall compensation process, board directors are powerless to stop CEOs from pushing through ever-higher compensation packages.
Another Job for Steve Jobs? The CEO of Apple and Pixar Could Face Conflicts of Interest As a Director of Walt Disney, Wall Street Journal, January 23, 2006.
The frequency with which Disney has to wall off discussions about sensitive deals could end up defeating the point of having Mr. Jobs on the board in the first place, according to corporate-governance experts. If the walls are set so high that Mr. Jobs can't engage in board discussions about substantive issues, "he can't be an effective board member," says Lucian Bebchuk, a Harvard Law School professor who heads the school's corporate-governance program.
Companies Must Come Clean on Executive Pay, U.K. Sunday Times, January 22, 2006.
The first is the lack of transparency. It is virtually impossible to determine from company reports just how much executives are being paid. In part this is due to the complexity of compensation packages, which include, in addition to ordinary salary, pension plans that Lucian Bebchuk and Jesse Fried in their book Pay Without Performance estimate can add more than a third to the total package; the company's assumption of some of its executives' tax liabilities; and a host of perks that are rarely mentioned.
Behind Every Underachiever, An Overpaid Board?, New York Times, January 22, 2006.
It is indeed one of life's mysteries why so many institutional stockholders have stayed silent on the subject of outrageous pay, lo these many years. We are talking real money, after all: Lucien A. Bebchuk, professor of law, economics and finance at Harvard Law School and director of its program on corporate governance, said compensation paid to the top five executives at all public companies in the three years ending in 2003 reached 10 percent of those companies' earnings.
Executive Envy, Wall Street Journal, January 21, 2006.
Instead, we get lectures about a new study from Harvard's Lucian Bebchuk and Cornell's Yaniv Grinstein noting that, from 2001 to 2003, top executive compensation amounted to 9.8% of the net income of 1,500 publicly traded firms. This is thought to be . . . exorbitant.
Op-Ed by Lucian Bebchuk: Beyond Disclosure, Forbes, January 19, 2006
Executive Pay, Economist, January 19, 2006.
Obfuscation is rife in three areas in particular--pensions, perks and deferred pay--and the SEC addresses all of them. The new rules will improve the disclosure of top executives' retirement benefits. Currently, it can require an academic study to work out the real figures. Research published last year by Lucian Bebchuk and Robert Jackson of Harvard University put the median value of the pension pots of a sample of top chief executives at $15m. Mr Bebchuk says that companies' "massive use of defined-benefit pension plans [for their top executives] has been partly motivated by a desire to provide chunks of performance-insensitive pay under the radar screen."
Learning What the Boss Really Makes, STL Today.com, January 18 2006.
The best part about the SEC proposal is the improved summary compensation table. For the first time, companies would have to show a total pay figure for five top executives, including the value of stock options, any increase in pension value, and all perks over $10,000. A study by Harvard professor Lucian Bebchuk indicates that pensions alone amount to about 34 percent of a CEO’s total pay, and pensions are notoriously hard to understand in the current disclosure format.
S.E.C. to Require More Disclosure on Executive Pay, New York Times, January 18, 2006.
"The positive effect will be that on the margin - and it is an important margin - there will be a new so-called outrage constraint," said Lucian A. Bebchuk, the director of the corporate governance program at Harvard Law School, who has documented how executive pay is often hidden and has far outpaced compensation for other employees. "The caveat is that even though there is an outrage constraint, shareholders have very limited power to do anything about it."
No More Hiding The Corporate Jet, The Monitor's View, January 18, 2006.
According to Harvard Law School professor Lucian Bebchuk, the salary, bonus, and stock of the top five executives at the 1,500 largest US publicly traded companies was nearly 10 percent of profits from 2001-03. That's double the percentage from 1993-95.
Top executives' pay merits a closer look, The Record, January 17, 2006.
But another recent study shows that's not the case. Professors Lucian Bebchuk of Harvard and Yaniv Grinstein of Cornell found that from 1993 to 2003, total cost of executive pay grew from 5 percent of annual corporate earnings to 10 percent.
Solving a $122 Billion Problem, Fortune, January 17, 2006.
What's more, new research by Lucian Bebchuk, a Harvard Business School professor who studies executive pay, indicates that pay as a proportion of earnings is growing. From 1999 to 2003, the top five execs at the 1,500 largest public companies, as a group, took home $122 billion in salary, bonus and stock. That's not chump change.
The SEC's Test, Washington Post, January 17, 2006.
The question is whether the SEC's proposal will go as far as it should, especially on retirement compensation. At present, firms are not required to disclose the value of defined-benefit pension promises to executives, so reports of bosses' pay generally leave these out. But the value of these promises can be enormous. When Franklin D. Raines was pushed out of the top job at Fannie Mae in 2004, he left with an annual pension of $1.4 million for as long as he or his wife lives. Pension promises generally account for almost a third of a chief executive's total career compensation, according to Harvard's Lucian A. Bebchuk.
Obscene Executive Pay Does Affect Earnings and the Economy, Philadelphia Inquirer, January 16, 2006.
But another recent study shows that's not the case. Professors Lucian Bebchuk of Harvard and Yaniv Grinstein of Cornell found that from 1993 to 2003, total cost of executive pay grew from 5 percent of annual corporate earnings to 10 percent.
Disclosure Won't Tame C.E.O. Pay, New York Times, January 14, 2006.
Better disclosure rules are all fine and well, but we already know plenty about executive pay. We know that it is out of control, socially corrosive and divorced from any real rationale (did Michael Dell really need stock options to ''incent'' him?). Nor is it economically insignificant. According to Lucian A. Bebchuk, an executive compensation expert at Harvard, from 2000 to 2003, the total compensation of the five best-paid officers of all publicly held companies amounted to 10 percent of corporate earnings.
Executive Envy, Townhall.com, January 12, 2006 .
The Wall Street Journal article relies on Harvard law professor Lucian Bebchuk -- "a critic of the disconnect between pay and performance" -- and Yaniv Grinstein of Cornell: "In the period from 2001 to 2003, top-executive compensation (for the top five executives) amounted to 9.8 percent of the companies' net income, almost double the 5 percent in 1993 to 1995." That might be interesting if stockholders measured performance by FASB earnings rather than by stock prices and dividends.
S.E.C. to Propose New Rules on How Executive Pay Is Reported, New York Times, January 11, 2006.
A study by Lucian A. Bebchuk of Harvard and Yaniv Grinstein of Cornell found that corporate assets used to compensate the top five executives at companies grew from less than 5 percent to more than 10 percent of aggregate corporate earnings from 1993 to 2003. The result was a large decline in company and portfolio values with no associated strengthening of management incentives.
Memo to Activists: Mind CEO Pay, Wall Street Journal , January 11, 2006.
Lucian Bebchuk, a Harvard Law scholar of executive-pay practices, published a study in the fall with Cornell's Yaniv Grinstein that attempts to measure pay as a portion of earnings. The results are eye-opening: From 1999 to 2003, the five top dogs at each of the 1,500 largest publicly traded firms cumulatively took down $122 billion in salary, bonus and stock, compared with $68 billion from 1993 through 1997.
Four Years Later, Enron's Shadow Lingers as Change Comes Slowly, New York Times, January 5, 2006.
One study, by Lucian A. Bebchuk of Harvard and Yaniv Grinstein of Cornell, found that corporate assets used to compensate the top five executives at companies grew from less than 5 percent to more than 10 percent of aggregate corporate earnings between 1993 and 2003. The result was a large decline in company and portfolio values with no associated strengthening of management incentives.
Rein in the corporate wages of excess, The Atlanta Journal-Constitution, January 3, 2006.
In the 1993-1995 period, public companies in the United States paid their top five executives the equivalent of 5 percent of profits, according to compensation researchers Lucian Bebchuk of Harvard University and Jesse Fried of the University of California at Berkeley. By 2000-2002 it had reached a staggering 12.8 percent of corporate profits. The drain declined, but was still significant at almost 10 percent in the 2001-2003 period, the latest stretch of time the two law professors considered.

2005

How large companies can make shareholders happy, The Age.com, December 22, 2005.
Indeed, the chief proponent of shareholder empowerment, Harvard law professor Lucian Bebchuk, has conceded as much. In an article published in the Harvard Law Review earlier this year, Bebchuk commented that: "I do not view increasing shareholder power as an end in and of itself. Rather, effective corporate governance, which enhances shareholder and firm value, is the objective underlying my analysis."
SEC Aims to Clarify Executive Pay, Los Angeles Times, December 16, 2005.
Lucian Bebchuk, a Harvard professor who studies executive pay, said retirement plans were also
poorly disclosed. He determined this year that the median plan offered to CEOs of Fortune 500
companies was worth $15 million. The cost of these plans was largely not reflected in cash
compensation tables, he said.
Joining A Board: The Porcupine Approach, The Corporate Counselor, November 2005.
Check out the compensation committee.I think we've seen enough high-profile examples to know that compensation is a hot-button issue. Professor Bebchuk of Harvard Law School has put us on notice with his book, "Pay Without Performance." You must ask if the compensation committee has the kind of freedom you think it should have. Does the committee have the right to go out and hire compensation experts? Does it look at the cost across the entire corporation to find the true cost of an executive and not simply his or her income? How much influence does the CEO have on compensation? Is it a corporation that historically has been a pay-for-play corporation when you hit 350, you're rewarded, and when you hit 245, you're not rewarded?
Battle for Board Would be Costly and Carry Risk, Financial Times, November 30, 2005.
Lucian Bebchuk, director of Harvard Law School's corporate governance programme, said the most likely outcome of Mr Icahn's planned proxy contest was a settlement with Time Warner's 14-member board.
Cox Embarks on First Governance Initiative, Financial Times, November 28, 2005.
Lucian Bebchuk, director of Harvard law school's corporate governance programme, found in a research paper that between 1996 and 2004, only 108 public companies faced contested board elections that were designed to oust sitting directors. Only 17 companies with market capitalisations of more than $200m faced such elections, and in just two cases were the rival slates of candidates triumphant.
Too Many Turkeys, Economist, November 24, 2005.
So is there a cure? Certainly, fuller disclosure would help, argues Lucian Bebchuk of Harvard Law School and co-author of a recent book, "Pay Without Performance: The Unfulfilled Promise of Executive Compensation". If there were proper disclosure of forms of executive pay such as pensions, supplementary pensions and deferred compensation, then it would be easier for shareholders to see whether chief executives are being rewarded for genuinely good work.
Transforming the Myth of Democratic Shareholder Power into a Reality, Socialfunds.com, October 27, 2005.
A new paper by Harvard Professor Lucian Bebchuk debunks the myth of shareholder power to replace directors, and recommends reforms that could jumpstart the stalled SEC proxy access rule.
Corporate America and Congress: Has Sarbanes-Oxley Restored Investor Confidence? Federal News Service, US News & World Report, October 5, 2005.
MS. ELLSWORTH: I just have to jump in for one second, which is I do think I agree that it should be set by independent directors. I do think that there has to be a strong process. But I think all of us on the panel agree that current disclosure -- you look like a very bright person, but if I gave you an annual report and a 10K, I can promise you, you go through it until Friday and still not figure out exactly what that CEO is making nine times out of 10. And I think what we've seen is some interesting studies this year alone. One from, for example, professors of Harvard, Bebchuk and the like, who are talking about pension packages.
'Stealth' Pensions Hide Huge CEO Payouts, MSNBC, MSN Money, September 28, 2005.
After all, most companies already have a single number that represents the value of pension obligations for each top executive. Those companies that don't could compute such numbers at little cost, says Harvard Law School professor Lucian Bebchuk, author of a book on executive pay called "Pay Without Performance: The Unfulfilled Promise of Executive Compensation."
Biogen Details Executive Stock Awards in Wake of Layoff Plans, Boston Globe, September 17, 2005.
"You need to ask why these people need something extra at this time," said Lucian Bebchuk, director of the Program on Corporate Governance at Harvard Law School. "Why was what they were getting before not sufficient?"
When the Boss Makes Big Money, Plastics News, August 29, 2005.
Other critics, like Harvard professor Lucian Bebchuk, argue that compensation problems stem from boards that are not independent enough from the executives they oversee. The problem, as they see it, is a corporate power structure that favors the CEO.
Figuring Execs' Pensions Takes Advanced Math, St. Louis Post-Dispatch, August 14, 2005.
In a paper published in March, Lucian Bebchuk and Robert Jackson of the Harvard Law School studied a sample of large-company CEOs who left their jobs during 2003 and the first half of 2004. They waded through the opaque disclosure documents and attempted to put a value on this benefit.
Op-Ed by Lucian Bebchuk: The Disney Verdict and the Protection of Investors, Financial Times, August 12, 2005
The Disney Verdict and the Protection of Investors, Financial Times, August 11, 2005.
By Lucian Bebchuk
The Delaware Chancery Court issued its long-awaited and important opinion in the Disney litigation earlier this week, absolving the defendant directors of any liability. The decision makes it clear that investors cannot look to judicially imposed liability for protection from disastrous compensation decisions and other governance failures. What the decision leaves unclear, however, is where shareholders can look to for such protection under existing corporate arrangements.
NYSE Faces Criticism for Planned Governance Policies, Newsday.com, July 27, 2005.
These proposed policies appear designed "to give shareholders very little say and to give the board the decisive say in the company's corporate-governance arrangements," said Lucian Bebchuk, a professor at Harvard Law School and director of its corporate-governance program. A study co-authored by Bebchuk found that such takeover defenses tend to erode companies' market value, in part because they "make the board less accountable" to shareholders.
Millions Richer, Ex-CEO Departs Delta Payroll, Atlanta Journal Constitution, July 27, 2005.
Company boards often sweeten exit packages "even when [CEOs] are pushed out," Bebchuk said. A hefty exit deal can lower some directors' opposition to booting an executive, Bebchuk said. "They are doing it not with their own money, but the shareholders' money," he said.
You Deserve a Refund for Fat CEO Pay, Christian Science Monitor, July the Governance Front, Corporate Control Alert, July 12, 2005.
"The agenda's champions are well known: entities such as the California Public Employees' Retirement System and State of Wisconsin Investment Board; various unions including the AFL-CIO; academics, among them Charles Elson of the University of Delaware and Lucian Bebchuk of Harvard Law School; gadflies such as Robert Monks and Nell Minow; and in a more cautious way, self-appointed gurus of good governance such as Ira Millstein of Weil, Gotshal& Manges LLP."
Money Talks, Corporate Counsel, July 2005.
As talking points, we asked panelists to consider some recent proposals for fixing executive compensation. These included the increased disclosure requirements that the Securities and Exchange Commission is currently considering, the heightened role for shareholders advocated by Lucian Bebchuk and Jesse Fried in their book, Pay Without Performance, and the reforms suggested to the New York Stock Exchange, Inc., by Winston & Strawn's Dan Webb in his investigation of the compensation paid to former NYSE CEO Richard Grasso.
To Rein in CEOs' Pay, Why Not Consider Outsourcing the Post? Wall Street Journal, July 19, 2005.
"But when you look at the fine print of his contract, you see that a chunk of that annual bonus is virtually guaranteed," says Lucian Bebchuk, a Harvard law professor and co-author of "Pay Without Performance." "The main justification for escalating CEO pay levels is the need to generate powerful incentives -- but in reality the links between pay and performance aren't strong," he adds. Indeed, a big portion of executive compensation, including rich guaranteed retirement payments and "stealth" benefits such as free lifetime use of corporate jets, are completely divorced from performance.
Morgan Stanely's Missteps with Executive Pay Packages, Wall Street Journal, July 13, 2005.
According to a study completed this spring by Harvard Law School professors Lucian Bebchuk and Robert Jackson, the median pension plan for a departing CEO of a Standard & Poor's 500 company in 2003 and 2004 was $15 million. It's normal to offer merely one year of severance, pay experts say.
AFSCME Employees Pensions Plan Recommends Board Reform at Morgan Stanley, AFSCME Press Release, June 29, 2005.
Currently, Morgan Stanley uses a plurality voting standard for director elections, which means that the nominee who receives the most votes will be elected. Nearly all corporate director elections, including the last five at Morgan Stanley, are uncontested; in other words, there is only one candidate for each open seat. (Harvard Law School Professor Lucian Bebchuk has estimated that there were only about 80 contested elections at public companies from 1996 through 2002.) In uncontested situations, a plurality voting standard ensures that a nominee will be elected even if holders of a majority of shares voting exercise their right to withhold support from the nominee on the proxy card. Indeed, under plurality voting, a single share could elect a nominee.
Rich Rewards for the Regions Corporate Elite, Washington Post, June 27, 2005.
Lucian A. Bebchuk, a professor of law and economics at Harvard Law School who has studied the effect of corporate governance and executive compensation on shareholder value for more than a decade, said the executive numbers in the Washington area mirror national trends.
Tyco's former CEO and CFO are Convicted of Stealing More than $600 Million From the Company, National Public Radio, June 18, 2005.
SOLOMON: It's questionable what kind of impact the verdict will have on the larger issues of corporate governance and executive pay. Lucian Bebchuk, a Harvard business professor and co-author of the book, "Pay Without Performance," says the Tyco case will do little to inject some control over the massive pay of top executives.
Professor LUCIAN BEBCHUK (Harvard Business School): Good corporate governance cannot be produced by the blind instrument of the criminal law. And the problem we have had with executive pay is not that executives took something that was not approved but rather that boards and directors approved pay packages that have not been in the interest of shareholders.
SOLOMON: Instead of high-profile criminal cases, Bebchuk suggests that shareholders have more power to vote in company boards and get more information about executive pay.
Speech by SEC Staff, Chester S. Spatt: Governance, the Board and Compensation, SEC, June 9, 2005.
An important aspect of governance that deserves much attention is the role of the board of directors and the extent to which a board mitigates existing incentive problems vis--vis the senior management and to what extent it creates incentive problems of its own. The role of the board is fundamental, but perhaps not adequately emphasized, at least in the academic literature.2 The board hires the Chief Executive Officer (CEO) and is responsible for managing succession. Yet there is typically a lot of interaction between the board and the CEO, whether or not the CEO serves as Chairman as well. The CEO often has tried to influence the composition of the board; an interesting empirical analysis of this is in Shivdasani and Yermack (1999). This discussion emphasizes that "conflicts of interest" may be crucial. An interesting academic analysis of the importance of conflict of interest in the determination of CEO compensation is given by the widely publicized book by Bebchuk and Fried (2004).3 The board sets the compensation for senior management, including the CEO, by a Compensation Committee. "Benchmarking" is often used, though the approach does not seem designed to produce a lot of effective information. Interestingly, the board is self-perpetuating (with new members selected by a Nominating Committee) and the auditor reports (in part) to the board through the Audit Committee.
Money Can't Buy You . . . Performance, The Age, June 10, 2005.
In Pay Without Performance: The Unfulfilled Promise of Executive Compensation (Harvard University Press, 2004), prominent US law professors Lucian Bebchuk and Jesse Fried point out that in the US between 1991 and 2003 the average large-company CEO's total remuneration increased from 140 times the pay of an average worker to 500 times average pay. Similarly, in Australia between 1992 and 2002 CEO remuneration increased from about 22 times average weekly earnings to 74 times average earnings.
War on Section 404, The Daily Deal, June 6, 2005.
Executives at small-cap companies, those yelling the loudest about Sarbanes-Oxley, earn a larger percentage of the company's earnings than CEOs of companies with medium and large stock market capitalizations. According to a soon-to-be released study by Lucian Bebchuk, director of the corporate governance program at Harvard Law School, the top five executives at small-cap companies received in earnings more than 25% of the profits of the companies between 2001 and 2003. "Executive compensation is much more of a big deal for small companies," Bebchuk says.
What are Mergers Good For?, New York Times, June 5, 2005.
Lucian Bebchuk, a professor of law, economics and finance and director of the program on corporate governance at Harvard Law School, recently wrote a book with Jesse Fried on executive compensation titled "Pay Without Performance." In it, he argues that when acquisitions enter the mix, top executives often get away with larger amounts of "gratuitous payment" than might otherwise be possible. One reason for this, he says, is that the gains typically made by the shareholders of a target company may lull them into complacency about outsize payments to top executives. In other words, since everyone is getting a little richer in the transaction, the fact that a couple of executives are getting a lot richer is less bothersome.
Breaking Step, Corporate Counsel, June 2005.
What exactly do insiders contribute? "Having executives in addition to the CEO is beneficial for two reasons," says Lucian Bebchuk, director of the Program on Corporate Governance at Harvard Law School. "First, getting to know other executives and interacting with them over a long period of time is potentially beneficial for future succession decisions that the directors will have to make. Second, hearing about the state of the company from more than one person could improve the quality of the picture directors have."
New Front Opens in Shareholder Demands for Comp Disclosure, Board Alert, June 2005.
"Once the pension values are included, it turns out that pay is much less linked to performance than investors realize," says Lucian Bebchuk, professor at Harvard Law School and co-author of the study with Robert Jackson. "Investors should have an accurate picture of the extent to which an executive's payana, Arial, Helvetica, sans-serif"> Harvard Law School Professor Lucian A. Bebchuk has taken aim again - this time at pensions for CEOs of major U.S. corporations. Last fall, Professor Bebchuk, together with Jesse M. Fried, a professor of law at the University of California, published "Pay Without Performance" (Harvard University Press), a book that is critical of the lack of linkage between top management pay and performance.
Now, Professor Bebchuk, together with Robert J. Jackson Jr., an Olin Fellow in Law and Economics at Harvard Law School, has published a report entitled "Putting Executive Pensions on the Radar Screen." (This will be referred to as "the report.") The report is likely to provoke significant attention and discussion. And deservedly so. It discloses that, for many CEOs, the portion of their pay represented by pensions is larger than many have realized.
Do CEOs Earn What They're Paid? Pioneer Press, May 22, 2005.
Law school professors Lucian Bebchuk and Jesse Fried see it differently. Last year, they skewered pay practices for top executives in their book, "Pay Without Performance."
They argue that the system is inherently flawed because existing pay arrangements generally don't link pay tightly with performance and even directors classified as independent are often co-opted by chief executives.
Fumo Earns $700,000 from Bank Firm; Could get Millions from Sale, Associated Press, May 15, 2005.
The board doubled Fumo's compensation to $709,800 in 2004, although he had stepped down as its chief executive the year before, remaining only as chairman. The average pay for chairman of comparable banks is $30,000, the newspaper said. "It's hard to conceive how this could serve the stockholders," said Harvard law professor Lucian A. Bebchuk, who has written a book on executive pay.
More Nickels on Top, Star Tribune, May 15, 2005.
In their 2004 book, "Pay Without Performance: The Unfulfilled Promise of Executive Compensation," Lucian Bebchuk and Jesse Fried report that in 1991 the average large-company CEO received about 140 times the pay of an average worker. By 2003, the ratio had enlarged to about 500 to 1.
Retiring is a Time for Hefty Rewards, The Baltimore Sun, May 15, 2005.
"If anything, you would think that executives are in a better position to bear the risks of investment performance than regular employees that have less of a cushion," said Lucian A. Bebchuk, director of Harvard's program on corporate governance and co-author of the pension study.
CEO Pay is Still on Steroids, The Providence Journal, May 10, 2005.
Executive pay now takes more than double the bite out of company earnings that it did a decade ago, according to a recent study by Lucian Bebchuk, a Harvard professor of law, economics, and finance, and Yaniv Grinstein, of Cornell University's School of Management. Looking at data for thousands of publicly traded companies, Bebchuk and Grinstein found that pay for the top-five company executives rose from 4.8 percent of aggregate net company income during 1993-95 to 10.3 percent of aggregate net income during 2001-03.
Retire Secretive Policy, Atlanta Journal-Constitution, May 10, 2005.
Perhaps new research on the overlooked cost to shareholders of executive retirement packages will motivate investors to demand a better accounting and the Securities and Exchange Commission to add some urgency to its review of compensation reporting rules. Lucian Bebchuk and Robert Jackson Jr. of Harvard Law School determined, from a sampling of the biggest public companies in the United States, that pension plans have the effect of ballooning executive compensation by an average of more than 48 percent.
Executive Pay: Over the Top?, ZENIT News Agency, May 7, 2005.
Bebchuk and Fried observe that the traditional view that considers an executive's salary as being set in a bargaining process between a board that is looking for the best deal for shareholders, and the executive who is seeking the best deal for himself, is mistaken. In fact, the data analyzed by the authors show that managerial power has played a key role in determining pay arrangements.
Morgan Stanley Board Takes a Pass on Special-Mtg Issue, Wall Street Journal, May 2, 2005.
That decision dismantles one of the most potent anti-takeover devices in the corporate toolbox, said Lucian Bebchuk, director of the Harvard Law School's Program on Corporate Governance.
"Essentially in the ranking of shareholder-unfriendly counterproductive provisions, the inability of shareholders to act between annual meetings falls significantly behind the ability to remove the whole board at the annual meeting," he said. "Having a staggered board is more pernicious and problematic then precluding action by either written consent or calling a special meeting."
Textron Shareholders Convert, Boston Globe, April 27, 2005.
The ICCR is a 34-year-old coalition of 275 faith-based institutional investors with combined portfolios of about $110 billion. The organization seeks to integrate social values into corporate and investor decisions, according to a statement.
Unclear is whether the vote will actually lead to changes at Textron, because shareholder resolutions are not legally binding, according to Lucian Arye Bebchuk, director of the corporategovernment program at Harvard Law School.
Fighting over Fairness Opinions, Corporate Control Alert, April 27, 2005.
Such skepticism is not new. In a 1989 paper, Marcel Kahan, now a professor of corporate law at the New York University School of Law, and Lucian Bebchuk of Harvard Law School suggested that judges "exercise substantial caution in assessing and giving weight to fairness opinions." Kahan recently said that he thought most investors have also long understood the basic conflict underlying fairness opinions.
The New Economic Warriors, Wall Street Journal, April 13, 2005.
From 1993 to 2003, the average compensation of CEOs of the Standard & Poor's 500 companies rose 146 percent after inflation, report Lucian Bebchuk of Harvard Law School and Yaniv Grinstein of Cornell University.
A Perk Takes Off, Wall Street Journal, April 11, 2005.
One reason some people take issue with such arrangements is that the executive often gets to use the plane just for being available -- not necessarily for actually providing a service, says Lucian Bebchuk, a Harvard law professor and co-author of the book "Pay Without Performance." "The new CEO often doesn't like to get the advice of the old CEO," says Mr. Bebchuk.
Who's Winning?, Wall Street Journal, April 11, 2005.
Analysts predict that pay-related shareholder resolutions will continue to spread. But many remain skeptical about how much more impact they will produce. "Shareholder action, and sometimes shareholder outrage, do provide some constraints on pay," says Lucian Bebchuk, a professor at Harvard Law School.
CEOs Return to Days of Runaway Pay, Perks, St. Petersburg Times, April 6, 2005.
All these mammoth paychecks have fallen under the spotlight of Harvard Law School professor Lucian A. Bebchuk, author of Pay Without Performance. The new book says CEOs increasingly get pay hikes without regard to corporate success or failure.
Studies Fault Current Systems for Executive Compensation, SEC Today, April 5, 2005.
A paper on the growth of U.S. executive pay, written by Harvard Law professor Lucian Bebchuk and Cornell University professor Yaniv Grinstein, highlights the importance of the ongoing debate over executive compensation. The paper found that executive compensation between 1993 and 2003 grew at a level beyond that which could be explained by changes in firm size, performance and industry classification. Bebchuk also released a paper co-written with University of California law professor Jesse Fried on the flawed compensation arrangements at Fannie Mae between 2000-2004. The Fannie Mae paper calls for a reform of the executive pay and corporate governance systems.
Street Fight, Barrons Online, April 4, 2005.
Such generosity is by no means an anomaly, we're pleased to say. A recent study by Lucian Bebchuk of Harvard Law and Yaniv Grinstein of Cornell confirmed that corporate boards are far from stingy in compensating their companies' brass. Further, the study, carried out under the aegis of the John M. Olin Center for Law, Economics and Business at Harvard Law School, disclosed that, in rewarding the captains of commerce and industry for their labors, the boards do not place inordinate reliance on such chancy considerations as the growth in a company's earnings.
The New Executive Bonanza: Retirement, New York Times, April 3, 2005.
"The fact is, we don't have good economic reasons for channeling dollars for this form," said Lucian A. Bebchuk, a Harvard Law School professor and co-author with Jesse Fried of a recent book, "Pay Without Performance." "There is a clear benefit in terms of making the amount of pay less transparent."
Op-Ed by Lucian Bebchuk: What Corporate-Governance Reforms are Still Necessary?, Optimize Magazine, April, 2005
The Pay at the Top is Through the Roof: CEO Rewards not Reality-Based, Professors Claim, Bloomberg News, March 31, 2005.
Lucian Bebchuk of Harvard Law School and Yaniv Grinstein of Cornell University's Johnson School of Management found that the top five executives at public companies received $ 92 billion in total compensation from 2001 to 2003, amounting to 10.3 percent of their firms' total net income. The ratio was more than double the 4.8 percent from 1993 to 1995, the authors said.
Study of Fannie Mae Cites 'Perverse' Executive-Pay Policy, Washington Post, March 31, 2005.
Lucian A. Bebchuk of Harvard Law School and Jesse M. Fried of the University of California at Berkeley School of Law, in a paper distributed by Harvard yesterday, said Fannie Mae rewarded Raines, Howard and other senior executives in such a way that "weakened and distorted" their incentives to create a strong company.... Bebchuk and Fried specifically criticized Fannie Mae's practice of awarding cash bonuses based on growth in earnings per share, saying it provided incentives for senior managers to manipulate accounting in Fannie Mae's huge portfolio of mortgage investments to reach earnings targets.
For Gillette CEO, it was a $29m Year, Boston Globe, March 31, 2005.
Over the past decade, salaries and bonus packages for chief executives have more than doubled when taking into consideration economic variables such as inflation, said Lucian Bebchuk, Harvard Law School professor and co-author of "Pay Without Performance: The Unfulfilled Promise of Executive Compensation."
Special Report: CEO Pay 'Business as Usual', USA Today, March 30, 2005.
"Large pay packages continue to touch a raw nerve," says Harvard professor Lucian Bebchuk, author of 2004's Pay Without Performance: The Unfulfilled Promise of Executive Compensation. "As long as boards are unaccountable, Corporate America won't change and fundamental problems will remain."
Out of Control?, Across The Board, March/April, 2005.
What's remarkable about Pay Without Performance, and which may give it more impact than other books about executive pay, is that it is not an angry screed but, rather, a studied, scholarly analysis whose understated language gives it a cumulative effect that is overpowering. Moreover, it was not written by any of the "usual suspects" -- the critics who have a bone to pick with corporate America and its excesses, which makes Bebchuk and Fried's book more credible and more damning.
Curbing Executive Entitlements, St. Petersburg Times, March 24, 2005.
According to the Post, salaries stayed strong even as corporate profits dropped in the late 1990s. "It's not something that can be explained by the economic fundamentals of a company," Lucian Bebchuk, a Harvard Law professor and director of the school's program on corporate governance, told the newspaper.
Executives Cash In, Regardless of Performance, Washington Post, March 22, 2005.
"Even though the escalation of pay has often been justified as necessary, when you look at the details, that is not the case, because much of the pay is not all that sensitive to performance," said Harvard Law School professor Lucian A. Bebchuk, author of the new book "Pay Without Performance."
Captians of Piracy, New York Times, March 21, 2005.
Indeed, C.E.O. pay increased most rapidly at companies with weak governance and few shareholder rights, according to a study this year by Lucian Bebchuk of Harvard and Yaniv Grinstein of Cornell. That study also found that public companies devoted about 10 percent of their profits to compensating their top five executives, up from 6 percent in the mid-1990's. That's a hijacking of corporate wealth by top managers.
Calpers Majority Vote Push Could Propel Issue Forward, Dow Jones Newswires, March 15, 2005.
Some governance experts, however, don't even think majority voting goes far enough. It's "a mild but important step toward improving the arrangement governing corporate elections," said Harvard law and economics professor Lucian Bebchuk. "While majority voting is a useful step in the right direction, it isn't sufficient. More needs to be done to turn corporate elections from a myth into a reality. To this end, shareholders should be provided with access to the ballot and staggered boards should be dismantled."
Verdict Could be a Bad Sign for Other Executives on Trial, Dow Jones Newswires, March 15, 2005.
"The protection of investors will depend little on whether Ebbers, Lay, or Scrushy will go to jail and for how long," said Lucian Bebchuk, director of the Harvard Law School's Program on Corporate Governance. "It will depend on whether or not we adopt the necessary structural reforms to make boards accountable and eliminate flaws in compensation arrangements."
CEO Bonuses Rose 46.4% At 100 Big Firms in 2004, Wall Street Journal, February 25, 2005.
"This is not a good trend because the bonus traditionally has not been well-linked to performance," says Lucian Bebchuk, a Harvard law professor and co-author of the recent book, "Pay Without Performance." Corporate boards' compensation committees have wide discretion to set and change management bonus programs.
Binding Resolutions and Coordination Circumvent Structural Limitations of Shareowner Action, SocialFunds.com, February 18, 2005.
Harvard Law and Economics Professor Lucian Bebchuk has written a paper to be published this year in the Harvard Law Review entitled The Case for Increasing Shareowner Power that supports the principle of AFSCME's stance. "My analysis indicates that the considerable weakness of shareholders in US companies is not a necessary consequence of the disperr executives have gleaned from deferred-c, February 9, 2005... "There is the possibility the pay package provides perverse incentives for a sale that is not necessarily for the right price and not at the right time for shareholders," said Lucian Bebchuk, professor and director of the Program on Corporate Governance at Harvard Law School.
Give Us More Money, Accounting Today, February 7, 2005.
For some time, it has become clearer and clearer to us at New Products that we make too little money, and that chief executives make too much. Harvard Law School professor Lucian Bebchuk and Berkeley law professor Jesse Fried make this clear (at least the part about executive pay) in their book, Pay without Performance: The Unfulfilled Promise of Executive Compensation, which delves into the widespread and systemic governance flaws that have allowed execs undue influence in the setting of their own pay, and the ways in which corporate boards' role as shareholders' agents has been subverted. Their proposed solutions revolve around fixing the misincentives involved in so many pay packages, and removing the barriers that insulate directors from their constituents.
Reining Back the Company Gravy Train, Management Today, February 7, 2005.
Lucian A. Bebchuk, professor at Harvard Law School, and Yaniv Grinstein of Cornell Business School, find that the pay of the top five executives at a number of large firms rose much faster than did company profit or stock market value since the early 1990s. That pay now accounts for nearly 10% of total corporate profit compared with 5.7% in the early 1990s.
The Compensation Conundrum, Tech Central Station, February 3, 2005.
In their new book Pay Without Performance (Cambridge, MA: Harvard University Press, 2004. Pp. xii, 278. $24.95), law professors Lucian Bebchuk and Jesse Fried contend that actors and sports stars bargain at arms'-length with their employers, while managers essentially set their own compensation. As a result, they claim, even though managers are under a fiduciary duty to maximize shareholder wealth, executive compensation arrangements often fail to provide executives with proper incentives to do so and may even cause executive and shareholder interests to diverge.
Capitalist Punishment, The Financial Times, January 29, 2005.
Figures compiled by Lucian Bebchuk, a Harvard University law professor, show that 68 per cent of non-financial corporations that went public between 1996 and 2000 incorporated in Delaware. Virtually every company that incorporates outside its home state now chooses Delaware.
Outfoxing Sarbanes-Oxley, Slate, January 24, 2005.
"It's just another way to provide executives with pay that isn't related to performance," says Lucian Bebchuk, a professor at Harvard Law School and co-author of the new book Pay Without Performance. "Most of these are basically cousins to the old loans that companies used to make before Sarbanes Oxley. They're lump sum transfers that may or may not be justified."
What's $13 Million Among Friends?, New York Times, January 17, 2005.
Professor Lucian Bebchuk writes: Ten former directors of Enron have agreed to pay $13 million from their own pockets to settle a class action suit stemming from Enron's collapse in 2001, which wiped out some $60 billion in shareholder value. Because directors almost never have to pay even a penny in such suits, the Enron settlement - announced just days after several former WorldCom directors agreed to a similar deal - was widely viewed as a significant development that could discourage potential directors from serving on corporate boards.
Mayday? Payday! Hit the Silk!, New York Times, January 8, 2005.
In their book, "Pay Without Performance" (Harvard University Press), Professor Fried and his co-author, Lucian Bebchuk, a Harvard Law School professor, contend that retirement pay is just the most recent hiding place for excessive compensation and that executive contracts are intentionally drafted to keep things quiet. "Compensation plan designers have an incentive to obscure or make more opaque the total value of an executive's compensation package," they wrote, "as well as to disguise the extent to which the form of compensation deviates from what best serves shareholders' interests."

2004

Nice Work if You Can Get It, Wall Street Journal, December 23, 2004.
In "Pay Without Performance" (Harvard University Press, 278 pages, $24.95), Lucian Bebchuk and Jesse Fried, two notable legal scholars, argue that CEOs are too often given incentives to pump up short-term earnings at the expense of long-term financial soundness and that CEOs too often get their jobs through over-friendly arrangements with company directors. Indeed, the authors believe that the fundamental practices of American business are rotten to the core.
Entrenched Directors Bad for Shareholder Value, Wall Street Letter, December 17, 2004.
A recent Harvard University study of 1,500 companies - over 90% of the U.S. stock market capitalization - concluded that "entrenching" provisions have a negative effect on shareholder value. Entrenchment regards company policies that protect directors from removal. Firms with a higher level on the entrenchment index had economically significant reductions in firm valuation and lower stockholder returns during the 1990-2003 period, according to the study's authors Lucian Bebchuk, Alma Cohen and Allen Ferrell.
In praise of the modern firm, The Economist, December 17, 2004
In "Pay Without Performance" (Harvard University Press) Lucian Bebchuk of Harvard and Jesse Fried of Berkeley set out to identify the failure of corporate governance that allows chief executives' compensation to carry on rising with little relation to performance. They point the finger firmly at board directors, arguing that "we should focus not only on insulating directors from the influence of executives [the direction of most regulation in the field so far], but also on reducing their current insulation from shareholders."
New Indexes Seek to Link Corporate Governance and Diversity of Financial Performance, SocialFunds.com, December 15, 2004
Harvard professor Lucian Bebchuk, Alma Cohen, and Allen Ferrell took this last notion one step further is a 2004 paper, isolating six corporate governance factors that affect financial performance, of the 24 IRRC factors (which are similar to the CGQ factors). Among the isolated provisions were staggered boards, poison pills, and golden parachutes.
Fund Management: Global Eye, Financial Times, December 13, 2004
Directors could finally be not merely independent of management, but "dependent on shareholders", as advocated by Harvard Law's Lucian Bebchuk and University of California-Berkeley's Jesse Fried in their new book Pay Without Performance.
Pay without Performance: The Unfulfilled Promise of Executive Compensation, New York Law Journal, December 13, 2004
In a thought-provoking book, "Pay Without Performance: The Unfulfilled Promise of Executive Compensation, "Professors of Law Lucian Bebchuk of Harvard Law School and Jesse Fried of the University of California at Berkeley examine factors that can prevent executive pay from accurately reflecting performance. In this reviewer's experience, there is no more complete and carefully considered published work addressing the weaknesses in the current executive pay process in the United States. Anyone involved in executive compensation matters or in issues of corporate governance will find "Pay Without Performance" a worthwhile read and a valuable information source for future reference.
Dealmakers Deprived of Ruling on PeopleSoft CAP Plan, Dow Jones Newswires, December 13, 2004
Harvard law and economics professor Lucian Bebchuk has conducted research concluding that companies with antitakeover measures created less value for shareholders over time. PeopleSoft's plan "is an especially worrisome takeover defense, because a poison pill is reversible in a way that this plan was not designed to be." If such customer plans are seen as valid and used in the future, "that would increase takeover defenses and obstacles to potentially efficient acquisitions beyond the existing arsenal of defenses," he said. "Right now, the validity of this defense is left in doubt, and given my view of how pernicious this defense can be, I hope the uncertainty would chill and discourage its actual use in the future."
Running out of Options, Pay for Performance, The Economist, December 11, 2004
Slowly the veil is being lifted from shareholders' eyes. William Donaldson, the chairman of America's Securities and Exchange Commission (SEC), said last week that, "we have to strive to get that information [on executive pay] in understandable and complete form". Last month CalPERS, America's biggest pension fund, adopted a plan to "tackle abusive executive compensation" which includes submitting a proposal to the SEC next year for greater transparency of compensation packages. Does this then mark defeat for proponents of the principle of pay-forperformance as more and more firms reveal the extent to which the truth has been "Pay without Performance"- the title of a recent book by two American law professors, Lucian Bebchuk and Jesse Fried?
CEOs and their Indian Rope Trick, The Economist, December 9, 2004
In aggregate, the sums forked out in pay to top American executives are now enormous. According to Lucian Bebchuk of the Harvard Law School and Cornell's Yaniv Grinstein, the top five executives of 1,500 large American companies in 1993-2002 received a total of about $250 billion.
Readings, Washington Post, December 5, 2004
In Pay Without Performance: The Unfulfilled Promise of Executive Compensation, professors Lucian Bebchuk and Jesse Fried offer a devastating critique of the way public companies pay their top executives. Relying on data rather than rhetoric, Fried and Bebchuk describe a diseased system in which executives wield enormous influence over their pay, board members have little incentive to slow the gravy train, and everyone involved goes to great lengths to hide the numbers from shareholders.
Top Execs' Generous Pay Puzzles Investors, Reuters, December 5, 2004.
"Of all the corporate-governance issues, this attracts the most attention because ... there has been very little progress," said Lucian Bebchuk, Harvard Law professor and co-author of the new book "Pay Without Performance, the Unfulfilled Promise of Executive Compensation." The most immediate fix, according to Bebchuk and others awaiting final 2004 compensation tallies in annual reports sent to shareholders in the spring, is complete disclosure of all elements of pay, written in plain English.
Gutierrez Severance Hinges on Reason for Leaving Kellogg, Dow Jones Newswires, December 3, 2004
Kellogg's employment agreements with its other top two executives - President and Chief Operating Officer David Mackay and Executive vice President Alan F. Harris - don't include similar "good-faith" language empowering them to be the arbiters of whether they're leaving for good reason. … Gutierrez may not need to cite his contract in order to get a severance package from the company. … "Obviously the board has lots of discretion in this kind of situation," said Lucian Bebchuk, a Harvard Law School professor who runs the school's corporate governance program.
Pay without Performance: The Unfulfilled Promise of Executive Compensation, The Chronicle of Higher Education, December 3, 2004.
In times both bullish and bearish, therpple" theories and other explanations that deny any systemic problem. Inadequate, say Lucian Bebchuk, a professor of law, economics, and finance at Harvard University, and Jesse Fried, a professor of law at the University of California at Berkeley. In Pay Without Performance: The Unfulfilled Promise of Executive Compensation (Harvard University Press), the scholars uncover what they say are widespread, persistent, and indeed systemic flaws in compensation arrangements.
Inflated Pay, Time Magazine, December 3, 2004
Ever wonder if corporate executives are paid too much? Look at it this way: from 1993 to 2002, the aggregate compensation of the top five executives in all public companies amounted to an astonishing $250 billion, equivalent to 7.5% of all corporate earnings. Defenders of the status quo say that such bloated pay provides managers - particularly CEOs - with incentives crucial to high performance. Those defenders have not yet read Lucian Bebchuk and Jesse Fried's Pay Without Performance. The authors marshal a formidable arsenal of facts to pick apart the incentives argument, exposing myriad ways in which CEOs have decoupled pay from performance and hidden that fact from investors with the aid of supine corporate directors. The lucidly argued treatise frames the issue not in ethical terms but as a problem of efficiency. As for solutions, Bebchuk and Fried maintain that board directors should be not only more independent of the executives they supervise but also much more dependent on stockholders. If shareholders had the power to alter the composition of the corporate board, the authors argue, directors would be more likely to keep investors' icentive for managers to manage a business for long-term growth. That is why the Financial Accounting Standards Board must not be hindered in its initiative to issue a rule treating stock options as an expense.
Staggering, The Economist, November 13, 2004
Another disappointment is the slow progress in abolishing "staggered" boards - ones where only one-third of the directors are up for re-election each year to three-year terms. Invented as a defence against takeover, such boards, according to a new Harvard Law School study by Lucian Bebchuk and Alma Cohen, are unambiguously "associated with an economically significant reduction in firm value".
Where are the Economists?, New York Times, October 28, 2004
Lucian A. Bebchuk, professor of law, economics and finance at Harvard Law School, and Yaniv Grinstein of Cornell Business School find that a proper calculation of the total compensation of the top five executives of all companies, including salaries, stock options and pensions, came to a stunning $260 billion over the last 10 years. This might be justifiable if there were ample evidence it was based on market performance or corporate earnings. But Mr. Bebchuk and Mr. Grinstein find that since the early 1990's pay has risen about twice as fast as the market value of stocks and much faster than corporate income. Total compensation was 5.7 percent of total corporate income in the early 1990's; it is now under 10 percent.
An Index for Board Watchers, Business Week, October 18, 2004
Researchers have long tried to assess the impact of good governance on stock returns. On Nov. 1, proxy adviser Glass Lewis will introduce a stock index that links the two. Based on research from Harvard Law School professor Lucian Bebchuk, the Shareholder Rights Index reweights the Standard & Poor’s 500-stock index, giving more heft to companies with less-entrenched boards.
The Region's Highest-Paid Executives, Washington Post, August 20, 2004.
That is still the case nationwide, too, experts said. "Despite the substantial pressure on companies to change, and despite the widespread recognition that things should change, there has been far too little change in the compensation landscape," said Lucian A. Bebchuk, director of Harvard Law School's program on corporate governance.
Harvard Study Correlates Staggered Boards With Lower Shareowner Value, CSR Wire, July 15, 2004
Corporate governance advocates have long opposed classified boards, which stagger director re-elections to prevent the removal of the entire board. Many take action by filing shareowner resolutions year after year calling for annual board elections. &Now, an academic study provides empirical evidence that bolsters the case against staggered boards by correlating them to lower shareowner value. The Harvard Law School Program on Corporate Governance published the study, entitled "The Costs of Entrenched Boards," in late June. Lucian Bebchuk, a Harvard law professor and director of the corporate governance program, and Alma Cohen of the National Bureau of Economic Research (NBER) and the Analysis Group, a financial strategy consultancy, co-authored the study.
Two New Studies Could Provide Ammo Vs Governance Backlash, The Wall Street Journal, June 29, 2004.
One of the studies, co-authored by Lucian A. Bebchuk, a Harvard Law School professor and director of the school's corporate governance program, found that companies with staggered board terms deliver less shareholder value than those that hold annual director elections.
Options Expensing Ripe for Abuse, TheSreet.com, June 29, 2004.
"Arguably all companies will have an incentive to underestimate" if forced to expense options costs, said Lucian Bebchuk, a professor of law, economics and finance at Harvard Law School. "The evidence is strong that, in general, management always errs on the side of lower numbers where discretion is available."
NASD Scrutinitizes Conflicts in Bankers' 'Fairness Opinions', Wall Street Journal, June 11, 2004.
There's a fundamental conflict to begin with when a company hires an investment banker with the expectation that they will provide the company with the fairness opinion they are looking for," said Lucian Bebchuk, professor of law, economics and finance at Harvard Law School. "Disclosing that this problem exists .. might enable the shareholders to assign a touch less weight to the investment banker's opinion," but the incentives will still exist, he said.
The Stock-Option Myth, Business Week, May 6, 2004.
When it comes right down to it, few employees are going to work against the best interests of a company that's putting food on their table or their kids through college, especially when the outfit is trying to restore the value of underwater options. "What's special here is that they knew options were coming," says Lucian A. Bebchuk, a professor at Harvard Law School, who has written widely on corporate governance. "What makes them work hard is whatever emotional reaction they have to what the company's doing for them."

2003

2002

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