Directors and Shareholders as Equity Partners? Handle with Care!

Abstract

Besides the press, many other observes have been outspoken in theri criticism of execute compensation. Until recently, however, the companesation of the directors of corporate boards who, themselves, set executibve salaries, has receive little attention. Boards are routoinely accused of bd judgment, lack of attention, or lack of independce from managment. Stock based compensation plans for director, however, add a challenging new element to the critics's arsenal. For director to pearsonally benfits from theri own already questionable compensation practice is yet a further complications. Until there are more deifinitve data abut the efficacy of board stock-based compensation programs in relation to corporate financial perfomance, the autors suggest taht boards may want to tread lightely in this area.