Essays On CEO Compensation: New Evidence On The Managerial-Power Vs. Optimal Contracting Debate

This dissertation analyzes the effect of market analysts’ expectations of share prices (price targets) on executive compensation. It examines how well the estimated effects of price targets on compensation fit with two competing views on determining executive compensation: the arm’s length bargaining model, which assumes that a board seeks to maximize shareholders’ interests, and the managerial power model, which assumes that a board seeks to maximize managers’ compensation (Bebchuk et al. 2005). The first chapter documents the pattern of CEO pay from fiscal year 1996 to 2010. The second chapter analyzes the Institutional Broker Estimate System Detail History Price Target data file, which that reports analysts’ price targets for firms. I show that the number of price target announcements is positively associated with company share price’s volatility, that price targets are predictive of changes in the value of stocks, and that when analysts announce positive (negative) expectations of future stock price, share prices change in the same direction in the short run. The third chapter analyzes the effect of price targets on executive compensation. I find that analysts' price targets alter the composition of executive pay between cash-based compensation and stock-based compensation. When analysts forecast a rise (fall) in the share price for a firm, the compensation package tilts toward stock-based (cash-based) compensation. The substitution effect is stronger in companies that have weaker corporate governance. The fourth chapter explores the effect of the introduction of the Sarbanes-Oxley Act (SOX) in 2002 and its reinforcement in 2006 on the options granting process. I show that the introduction of SOX and its reinforcement eliminated the practice of backdating options but increased “spring-loading” of option grants around price targets announcements. Overall, the dissertation shows that price targets provide insights into the determinants of executive pay in favor of the managerial power model.

When the Practice of Theorizing Meets the Theorizing of Practice. Social Knowledge Making in Organization Science Academia and Managerial Communities

The aim of the present work is to contribute to a better understanding of the relation between organization theory and management practice. It is organized as a collection of two papers, a theoretical and conceptual contribution and an ethnographic study. The first paper is concerned with systematizing different literatures inside and outside the field of organization studies that deal with the theory-practice relation. After identifying a series of positions to the theory-practice debate and unfolding some of their implicit assumptions and limitations, a new position called entwinement is developed in order to overcome status quo through reconciliation and integration. Accordingly, the paper proposes to reconceptualize theory and practice as a circular iterative process of action and cognition, science and common-sense enacted in the real world both by organization scholars and practitioners according to purposes at hand. The second paper is the ethnographic study of an encounter between two groups of expert academics and practitioners occasioned by a one-year executive business master in an international business school. The research articulates a process view of the knowledge exchange between management academics and practitioners in particular and between individuals belonging to different communities of practice, in general, and emphasizes its dynamic, relational and transformative mechanisms. Findings show that when they are given the chance to interact, academics and practitioners set up local provisional relations that enable them to act as change intermediaries vis-a-vis each other’s worlds, without tying themselves irremediably to each other and to the scenarios they conjointly projected during the master’s experience. Finally, the study shows that provisional relations were accompanied by a recursive shift in knowledge modes. While interacting, academics passed from theory to practical theorizing, practitioners passed from an involved practical mode to a reflexive and quasi-theoretical one, and then, as exchanges proceeded, the other way around.

Better Regulation in Latin American Countries: A tool for accountability?

In the last few years, a steadily increasing number of Latin American countries have been adopting policy assessment instruments and new governance structures for them, as part of their policymaking process. Even though the literature argues that these instruments serve, among other things, as tools for accountability, for this to be so, it is necessary to take into account the legal system, decision-making process, and regulatory relationships that exist in the adopting countries. This Thesis researches the policy assessment arrangements adopted and implemented in the Latin American region to understand why are these countries adopting and implementing tools for policy evaluation? Can this contribute towards regulatory accountability, and if so, in which conditions? The Thesis first analyzes the rationales that these countries might have to adopt these regulatory policy arrangements. It then studies the various tools used for policy assessment, paying attention to the scope of the assessments, the times and the stages on which regulations are assessed, referred to as the Policy Evaluation Cycle (PEC), as well as to the governance of these processes. The Thesis develops a framework where each of these components are organized and classified based on which goals or rationales they serve. This can assist countries on deciding how to implement their policy evaluation arrangements, to serve their own goals. Since all of the studied countries have presidential systems, this Thesis studies how regulations are made in this system, and the multiple needed delegations for policymaking, which results in various regulatory relationships. Thus, the desired accountability of policymakers towards their different forums makes relevant the adoption this agenda for regulatory accountability reasons. Bringing to together the literatures on public law, accountability and policy evaluation, this Thesis builds a framework for assessing the contribution towards accountability that each stage of the PEC might have in a specific regulatory relationship. The framework shows to which degree the stages, and the cycle as a whole, contribute towards accountability in specific relationships of a presidential constitutional system. The results evidence that even when a policy assessment structure might contribute towards accountability, this contribution is not absolute as it only operates in specific regulatory relationships, and even more, only in some stages of the PEC contributing at different degrees. This framework can be used by governments or regulatory agencies as an instrument to assess the contribution to accountability of their existing or potential regulatory policy structures in order to improve it.