487. Lucian Arye Bebchuk & Jesse M. Fried, Stealth Compensation Via Retirement Benefits, 08/2004; subsequently published in Berkeley Business Law Journal, Vol. 1, No. 2, Fall 2004, 291-326; forthcoming in the book Pay Without Performance: The Unfulfilled Promise of Executive Compensation.
Abstract: This paper analyzes an important form of “stealth compensation” provided to
managers of public companies. We show how boards have been able to camouflage
large amount of executive compensation through the use of retirement benefits and
payments. Our study highlights the significant role that camouflage and stealth
compensation play in the design of compensation arrangements. Our study also
highlights the importance of having information about compensation arrangements not
only publicly available but also communicated in a way that is transparent and
accessible to outsiders. We propose requiring public companies to place a monetary
value on all retirement benefits to which their executives become entitled. In particular,
firms should disclose to investors the annual buildup in the monetary value of
executives’ retirement benefits, including the value of tax savings reaped by executives
at the company’s expense.