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Walker, David I. --- "The Law and Economics of Executive Compensation: Theory and Evidence" [2012] ELECD 468; in Hill, A. Claire; McDonnell, H. Brett (eds), "Research Handbook on the Economics of Corporate Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Corporate Law

Editor(s): Hill, A. Claire; McDonnell, H. Brett

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848449589

Section: Chapter 13

Section Title: The Law and Economics of Executive Compensation: Theory and Evidence

Author(s): Walker, David I.

Number of pages: 21

Extract:

13. The law and economics of executive compensation:
Theory and evidence
David I. Walker



1. INTRODUCTION

It is difficult to imagine a corporate law topic that has generated as much consternation, or as
much academic research, over the last 20 years as public company executive compensation.
In a seminal article on executive pay written in the late 1990s, Kevin Murphy noted that the
academic research on the topic `had exploded' (Murphy 1999), but surely the journal pages
devoted to the topic in the 1990s are dwarfed by those produced since. The enterprise was and
is highly interdisciplinary, with important contributions emanating from law, economics,
corporate finance, and accounting, among other fields. This continuing academic interest is
not surprising given the level and salience of executive pay and ongoing debate concerning
the extent to which pay practices are consonant with corporate or shareholder interests.
This chapter is intended to provide an overview of the theory and evidence regarding
public company executive compensation. It is not comprehensive in either the choice of
topics or the coverage of those topics, but is meant to provide the reader with an entryway
into the literature on a select group of topics. Priority has been afforded to the most central
issues in executive pay, to issues that implicate law more or less directly, and to issues that
have been the primary focus of research in the last decade.
The chapter is organized as follows. The next section briefly outlines three broad theoret-
ical perspectives on the ...