Monthly Archives: May 2009

Post-SOX changes in Bonus Contracts

Posted by Jim Naughton, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on
Monday, May 11, 2009
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This post comes from Mary Ellen Carter of Boston College, Luann J. Lynch of the University of Virginia, and Sarah L. C. Zechman of the University of Chicago.

Complain all you want about Sarbanes-Oxley, but the 2002 act and related reforms have created a tighter link between executive pay and company performance. Our study, Changes in bonus contracts in the post-Sarbanes-Oxley era, forthcoming in the Review of Accounting Studies, examines the relation between CEO and CFO bonuses and their firms’ earnings from 1996 to 2005—in other words, before and after these reforms. We find that firms place greater weight on earnings in determining executive bonuses after 2002. Put differently, boards appear to trust earnings more and therefore are willing to use them as a bigger factor in setting pay.

Our results are strongest in firms most affected by Sarbanes-Oxley—that is, those that show the largest decrease in earnings management after the law took effect. We find that these firms change their bonus contracts the most, putting even more weight than average on earnings in bonus contracts in the post-period.

Sarbanes-Oxley, prompted by financial scandals like Enron and WorldCom, was intended to reduce the ability of executives to manage earnings. Economic theory predicts that, when managers have less discretion over earnings, firms will place greater weight on them in writing executive compensation contracts—the earnings should reflect executive effort rather than accounting shenanigans.

Of course, real-world factors might prevent the theoretical predictions from playing out. Sarbanes-Oxley and related reforms exposed executives to greater risks—post-reform, they have to personally certify their companies’ financial statements, and they face serious penalties, including imprisonment, for misstatements. To counter-balance those risks, boards might have left bonus contracts unchanged since bonuses themselves are inherently risky—if an executive doesn’t perform, she doesn’t receive the bonus.

But when we compare the bonus contracts of CEOs and CFOs—that is, the executives who face the new regulatory risks—with those of other top executives at the same firms, we find that the CEO/CFO contracts give even more weight to earnings in the post-period than do the contracts of the other executives.

This suggests that boards seized the opportunity that Sarbanes-Oxley offered. The law enabled them to hold CEOs and CFOs more accountable for financial results, which, after the law, reflected executive effort more than earnings manipulation.

The full paper is available for download here.

Avoiding Shareholder Activism

Posted by Matteo Tonello, The Conference Board, on
Sunday, May 10, 2009
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This post comes to us from Matteo Tonello of The Conference Board, Inc. and Damien Park of of Hedge Fund Solutions.

The Conference Board released an executive action report discussing expected trends in shareholder activism in light of the current economic and political environment. The paper is the fourth in The Conference Board series of papers on the oversight role of the board of directors in the financial crisis. It provides board members with a checklist of issues they should consider addressing in their relations with shareholders and, in particular, how to avoid a costly and disruptive battle with an activist investor.

With corporate valuation declining and an economic and political environment favorable to change, the 2009 proxy season is witnessing a new wave of investor demands. In particular, due to the liquidity problems facing many corporations, there is a clear shift from the financial-oriented activism campaign aiming at cash extractions to new initiatives pursuing strategic, operational, and governance-related corrections.

The paper argues that it is in the interest of corporate boards to act proactively, understand shareholder intentions, and correct vulnerabilities so as to avoid becoming the target of activists. A history of positive relations with shareholders, especially the largest ones, can be the most important asset when an activism campaign is launched or is in course. Following the example of Pfizer—which first announced, in 2007, the practice of inviting representatives of investors to meet regularly with the company’s board—several other companies experimented with forms of direct engagement, including road shows and town hall meetings with directors to discuss one or more issues raised by investors.

In these market circumstances, directors should make an extraordinary effort to test the business strategic viability, improve performance and reduce operational inefficiencies. In particular, The Conference Board recommends that board members, among other things:

• Reassess strategic goals in light of new macroeconomic trends, by exploring alternative approaches to business growth and remaining apprised on extraordinary transactions affecting company peers, customers, and suppliers.• Inquire about senior manager’s positions on relevant corporate practices and be persuaded by their arguments. If the company chooses to depart from widely accepted organizational standards, such a decision should be thoroughly articulated and motivated in disclosure documents.

• Revisit any policy, including measures of defense from unsolicited takeovers, which may foster the perception of board entrenchment and stand in the way of garnering institutional support or receiving third party proxy advisor vote recommendations.

• Conduct a thorough review and assessment of their company’s top executive compensation policy to: 1) Fully understand the possible effects of each single component of the pay package (including bonuses, equity-based awards, deferred compensation and severance) on the company’s decision-making process; 2) Ensure the right balance between base salary and other components; 3) Ensure that compensation incentives rely on performance metrics that are appropriately tied to the company’s long-term strategic goals; and 4) Be persuaded that managers cannot distort the intended mechanics and effects of such incentives to pursue opportunistic behaviors.

• Request senior financial executives and internal audit officers to promptly bring to the board’s attention those financial conditions (e.g., a substantial cash balance or a favorable debt-to-equity ratio) that could make the company attractive to activists.

• Develop an inventory of any corporate matter that may single out the company as a target, including foreseeable business events that could trigger activists’ initiatives (e.g. the announcement of an acquisition or of revisions to the policy for the compensation of top executives).

The paper also offers practical suggestions on how to design an action plan and respond to negative publicity campaigns mounted by disgruntled investors. Several current examples as well as a detailed table of cases from the 2009 proxy season are included.

Our paper is available here.

Beneath the Hype: Notes on Key Executive Compensation Issues

Posted by George R. Bason, Jr., Davis Polk & Wardwell LLP, on
Saturday, May 9, 2009
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This post from George R. Bason, Jr. is by colleagues Ning Chiu, William M. Kelly, Kyoko Takahashi Lin and Barbara Nims.

It’s proxy time, and business reporters are riding their favorite seasonal hobby horse: executive compensation. This year’s stories are colored by the current financial and business crisis, by the impact of various government assistance programs and by a Congressional response that has bordered on hysteria. A few compensation practices are receiving recurring attention, at times disproportionate to their actual prevalence or current impact. Here are some thoughts on a few of these practices.

Option Exchange Programs (“Repricings”)

Professors Black and Scholes have established that even underwater stock options have theoretical value, but try telling that to your employees. With so many options deeply underwater in the current market, companies are examining alternatives such as offering to exchange underwater options for new options or other compensation. Google, Intel and Starbucks are among the companies that have announced such programs. As of this month, 23 companies had completed programs this year, and over 50 additional companies have announced programs.[1] Technology companies, whose grant practices typically cover a broad employee base, have been leading the trend.

Shareholder approval is a threshold question for companies considering repricing. Most plans adopted in recent years expressly require shareholder approval for repricings. What if the plan is silent about repricings? Under NYSE rules, silence is equivalent to a prohibition. Nasdaq takes the same view as an interpretative matter, although its rules are not so explicit.

Even in the unusual instance where the plan expressly permits repricing, companies should consider the likely reaction of institutional shareholders and their advisers, like RiskMetrics Group (RMG). RMG will generally recommend a withhold vote in the following year for members of compensation committees that have implemented repricings without shareholder approval. Unless your ownership or governance arrangements allow you to be indifferent to such matters (for example, Google), shareholder approval will likely be appropriate.

If you seek shareholder approval, you should design the exchange program with RMG’s guidelines in mind. These include:

• excluding directors and executive officers from the program;• making the exchange “value for value”, meaning that employees will receive fewer options than they surrender;

• excluding options with a strike price lower than the stock’s 52-week high; and

• attaching holding periods and other restrictions to the new options to enhance retention incentives and avoid quick flips.

The benefits of any significant variations from the guidelines should be weighed against the possible risks of non-approval.

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Revisiting Corporate Governance Regulation

Posted by Jim Naughton, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on
Friday, May 8, 2009
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This post comes from Moshe Cohen of MIT.

In my working paper Revisiting Corporate Governance Regulation: Firm Heterogeneity and the Market for Corporate Domicile, which I recently presented at the Law, Economics and Organizations Workshop here at Harvard Law School, I use a discrete choice framework to analyze state design and firm choice of the implications of incorporation: corporate governance laws, corporate taxes and court structure.

In order to exploit the information revealed in the preferences displayed by the different firms, a novel dataset with firm and incorporation characteristics is assembled and then a random coefficient discrete choice model is specified. In the model, incorporation is treated as a “product” that the states design, differentiated along all of the dimensions of the implications of incorporation, including the discrete “price”—the tax implications incorporation imposes on each firm. In every one year period, each heterogeneous firm chooses its preferred “product” by choosing to incorporate, to remain incorporated, or to reincorporate in one of the 51 US jurisdictions. Firms are decomposed into their ownership patterns, director characteristics, industry concentration, financial profiles, the geographical location of their headquarter states, and the residual unobservable dimensions of heterogeneity within them. The choice of incorporation state is seen to be made based on the preferences—resulting from these dimensions of firm heterogeneity—for the laws, court characteristics and taxes that makeup the incorporation implications.

I find that all incorporation implications, the laws, the court characteristics and the incorporation taxes matter. I find that firms are very responsive to incorporation and franchise taxes. In addition, on average, firms like antitakeover statues, but, consistent with an agency story, firms with an institutional shareholder block and venture capital backed firms dislike them. On average, firms dislike mandatory governance statutes restricting managerial power and facilitating the representation of minority shareholders, but these laws are not as restrictive for the choice of firms in concentrated industries. All firms dislike well functioning courts, consistent with a litigation deterrence motive. The recovered firm preferences are then taken to the simulation of recently proposed federal reforms aimed at centralizing the domicile implications and restricting firm choice. They are also related to the documented differential returns earned by firms with better internal governance in the 1990s, as well as to other trading strategies that would have yielded abnormal returns in the 2000s.

The full paper is available for download here.

Shareholder Activism Report for 2008

Posted by Andrew Tuch, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on
Thursday, May 7, 2009

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This post comes to us from Glenn Curtis, Director of Strategic Research at Thomson Reuters.

Thomson Reuters has recently released its Strategic Research Report on Shareholder Activism for 2008. The report focuses on activist situations that have taken place from October through December 2008. It also details success and failure rates and other data pertaining to activist situations in 2007 and 2008. The source for this data was Thomson’s SDC Platinum™ database, the SEC, and various press releases.

Highlights from the report include the following:

• For the full year 2008 Information Technology and Consumer Discretionary companies were among the top targets for activist firms. This is consistent with previous research. In fact, Consumer Discretionary companies have been among the top targets for the last two years.

• The average target company in the fourth quarter of 2008 had a market capitalization of just $28.2 million. That was a significant decline from the $4.93 billion that was recorded in the third quarter. A decline in the share prices of the targeted companies may be one reason for the low market cap. However, it is worth noting that the companies that were targeted were smaller cap companies to begin with.

• The most common demands that activists made for the year were for board seats and to buy/sell the target company. Board seats have consistently been a top demand according to our prior research.

• The number of cases where activists were successful in achieving their goals declined from 2007 to 2008, while the number of compromise situations increased. More specifically, for the full year 2008 activists achieved their goals 29% of the time and compromise was reached 38% of the time. In 2007 activists were successful 41% of the time and compromise was reached in 12% of cases.

• Big name activists such as Carl Icahn and Pershing Square and others were notably absent from new activity in the fourth quarter. However, both were active throughout 2008 in several high profile cases.

• If historical patterns hold true, look for an uptick in activism cases in Q1 2009. Companies should be on high alert!

The report is available here.

Philippe Camus Discusses Alcatel Lucent Merger

Posted by The Harvard Law School Forum on Corporate Governance & Financial Regulation, on
Wednesday, May 6, 2009

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Alcatel-Lucent Chairman Philippe Camus was recently a guest speaker in Visiting Professor Laurent Cohen-Tanugi’s course on Transatlantic Mergers & Acquisitions. Mr. Camus, who expressed himself in his personal capacity, took on his position as Chairman in the second year following the merger of Alcatel and Lucent after the withdrawal of the executive team (Serge Tchuruk and Pat Russo) who negotiated and began implementing the merger. He was formerly CEO of EADS, the European aerospace and defense group.

Mr. Camus’ talk reflects on the implementation of the Alcatel-Lucent merger and draws broader lessons on the post-merger integration process and how to maximize the chances of success in a cross-border merger.

The presentation begins with an overview of Alcatel-Lucent and of the global consolidation of the telecommunications equipment and services market, which was the primary business rationale for the merger. Mr. Camus then goes on to address the specific challenges involved in the Alcatel-Lucent transaction, as a “merger of equals” and a cross-border business combination, in a technology-driven industry. In his view, the key success factors of a merger of that scale include a sound business case, clear leadership at the top to drive the integration process and manage the transition, speed of decision-making and implementation, and empowerment of middle management. Based on an employee survey conducted shortly after the merger, Mr. Camus believes that the integration process suffered from an excessive focus on “synergies” and cost-cutting, as opposed to innovation, operational efficiency and customer solution.

Two years after, drawing on these lessons, Alcatel-Lucent has a new executive team and a new board, which are implementing a new organization and business model.

A video of Mr. Camus’ presentation is provided below: (video no longer available)

Keep the Banks out of the Public-Private Investment Funds

Posted by the Harvard Law School Forum on Corporate Governance & Financial Regulation, on
Tuesday, May 5, 2009
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Editor’s Note: This post is based on an op-ed piece by Lucian Bebchuk published today in FinancialTimes.com. Professor Bebchuk’s most recent posts about the Public-Private Investment Program are available here and here.

Should banks with large amounts of troubled assets be allowed to participate as managers or investors in funds set up under the US’s public-private investment programme? The way the scheme is currently designed not only permits such banks to take part, but encourages them to do so.

Media reports indicate that some such banks are considering participating in funds established under the administration’s programme. Allowing such participation, however, is counterproductive. The effectiveness of the programme would be significantly enhanced if it were prohibited.

The programme’s design does not impose restrictions on the participation of such banks as private investors in funds set up under the scheme.

Furthermore, the qualifications for managers making purchasing decisions in these funds encourage, rather than discourage, participation by such banks as managers. In the legacy securities programme, managers must own at least $10bn in certain mortgage-backed securities and residential mortgage-backed securities. This high bar is one that some of the banks burdened with toxic paper will meet but that some large hedge funds active in this area will be unable to reach.

One problem with allowing banks clogged with troubled assets to participate on the buying side is that it defeats one of the programme’s main goals: to cleanse the balance sheets of these banks of troubled assets and thereby remove the uncertainty about the value of these assets that may currently impede the banks’ operations.

Allowing these banks to participate on the buying side in the programme’s activities will increase, rather than decrease, the amount of troubled assets that the bank owns directly and indirectly. It thus will increase the amount of assets with uncertain value on the banks’ books and delay rather than accelerate the banks’ return to normal operations.

The second problem with the participation of banks with large holdings of troubled assets on the buying side is that it will exacerbate the misalignment of interests between the private side in funds set up under the programme and taxpayers. To enhance the programme’s effectiveness and protect the interests of taxpayers, the interests of the private side – the fund’s manager and the private investors affiliated with it – should be aligned with the interests of taxpayers.

Under the current design of the programme, the private side will face asymmetric payoffs, capturing half of the upside but having to bear a smaller share of the downside. Critics have pointed out that such asymmetric payoffs would provide powerful incentives to seek assets with volatile value and over-pay for them. In another op-ed piece, I show how the programme can be redesigned, without discouraging the participation of private parties, to align the interests of the private side with those of taxpayers by providing the private side with the same share of both the upside and the downside.

Even if the programme were redesigned to provide the private side with the same share of the upside and downside, however, banks acting as managers of funds set up under the programme would still have distorted incentives. If a bank holding large amounts of toxic securities is selected as a fund manager in the legacy securities programme, and the fund subsequently pays excessively high prices for troubled assets, the bank might derive from such high prices benefits not shared by taxpayers invested in the fund.

To be sure, the programme’s current design prohibits transactions that are blatantly conflicted, barring each fund from purchasing assets from affiliates of its manager or from 10 per cent plus private investors in the fund. To the extent that prices paid for troubled assets affect the valuation of other troubled assets, however, a bank managing a legacy securities fund may have distorted incentives to overpay for troubled assets even when buying them from other banks.

It follows that banks holding significant amounts of troubled assets- the intended sellers under the programme-should not be allowed to participate on the buying side either as fund managers or as investors in funds. Their incentives are likely to be especially distorted, and their buying additional troubled assets either directly or indirectly would go against what the programme seeks to accomplish, both at a significant cost to the taxpayer.

To be sure, participation by banks on the buying side could provide them with significant profits, and thus would strengthen their capital positions. But transferring value to banks holding troubled assets in order to bolster their capital should not be a goal of the programme for buying assets; injection of capital into banks should be made only for consideration in securities and should be targeted at those banks that need additional capital, not banks holding troubled assets in general.

Short Sale Proposals: Key Questions

Posted by Annette L. Nazareth, Davis Polk & Wardwell LLP, on
Tuesday, May 5, 2009
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This post is by Annette L. Nazareth of Davis Polk & Wardwell LLP.

The Securities and Exchange Commission will hold a roundtable at its headquarters in Washington, DC today to discuss issues raised by its recent proposals to restrict short sales. Questions will be directed to three main topics: 1) Market Changes and Investor Confidence; 2) Bid versus Tick versus Circuit Breakers; and 3) Lessons and Insights from Empirical Data. In anticipation of the roundtable, we have issued a memorandum entitled “Short Sale Proposals: Key Questions,” which focuses on the structure of the SEC’s recent proposals and the key questions raised by them.

In response to public outcries for a regulatory response to sharp declines in equity prices, on April 10, 2009 the SEC released a set of proposals to restrict short sales (the “Release”). The proposals would reverse the SEC’s elimination – after extensive economic analysis and policy debate – of its prior uptick rule and other
short sale restrictions in 2007.

For nearly seventy years – from 1938 to 2007 – Rule 10a-1 under the Securities Exchange Act of 1934 generally prohibited short sales on listed stocks unless they occurred in a rising market (i.e., on an “uptick”). Specifically, short sales were permissible at or above the last sale price, with short sales at the last sale price permitted only if the last different sale price was below the last sale price. From 1994 to 2007, Nasdaq maintained a “bid test” for securities traded on its market. These rules were intended to prevent speculators from pushing down stock prices through short sales.

In response to clamor to restore the original uptick rule, the SEC has proposed, among other alternative approaches, a slightly updated version of the rule. Noting, however, that the operation of the market has changed dramatically since the abrogation of Rule 10a-1, the SEC also has proposed four alternative short sale rules to better accommodate the market realities of 2009. One proposal limits short sales into a declining bid price rather than a declining last sale price. The other three proposals employ “circuit breakers” that are triggered by a specified stock price drop and either temporarily halt short sales altogether or institute price restrictions based on last sales or bid price.

The SEC’s proposals contain very limited exceptions. As written, these exceptions might not cover most convertible arbitrage and equity derivatives hedging as those activities are currently conducted. We have also issued a companion piece, entitled “SEC Proposed Short Sale Restrictions: Implications for Equity Derivates and Equity-Linked Securities,” which focuses on the particular implications of the proposals for equity derivatives and equity-linked securities.

The Release contains nearly 200 questions on which the SEC seeks comment. Also significant are the specific issues on which the SEC did not ask for comment, which may indicate the SEC is predisposed toward certain rule outcomes.

The memorandum entitled “Short Sale Proposals: Key Questions” is available here, and the memorandum entitled “SEC Proposed Short Sale Restrictions: Implications for Equity Derivates and Equity-Linked Securities” is available here.

Delaware Adopts DGCL Amendments

Posted by James Morphy, Sullivan & Cromwell LLP, on
Tuesday, May 5, 2009
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This post comes to us from James Morphy, and is based on a Sullivan & Cromwell memorandum on recently-adopted amendments to the Delaware General Corporation Law.

SUMMARY
The Delaware legislature has enacted a number of amendments to the Delaware General Corporation Law (the “DGCL”) relating to the governance of Delaware corporations. The amendments address current corporate governance issues concerning: (i) proxy access and expense reimbursement; (ii) director indemnification and advancement of expenses; (iii) judicial removal of directors; and (iv) flexibility in setting record dates by providing that the record date for mailing the notice of meeting need not be the same as the record date for determining stockholders entitled to vote. The effective date of the amendments is August 1, 2009.

PROXY ACCESS AND EXPENSE REIMBURSEMENT
The amendments include the addition of two new provisions that relate to permissible bylaw provisions governing proxy contests. The effect of these changes is not to mandate either proxy access or expense reimbursement (unlike North Dakota’s 2007 statute which does so), but rather to provide a list of nonexclusive provisions that might be contained in a bylaw addressing proxy access or proxy solicitation expense reimbursement. As such, the amendments make no change in the Delaware law—properly constructed bylaws containing such provisions would almost certainly have been permissible under Delaware law prior to the adoption of these provisions. Nor do the amendments mandate the restrictions that are suggested—the statute simply provides that a bylaw may contain certain procedures or conditions, and lists a number of potential provisions. Adoption of these provisions does nonetheless clarify that under Delaware law, issuers may impose restrictions on proxy access and proxy expense reimbursement bylaws, which may influence, as a practical or legal matter, any future federal legislation or rule-making on the subject.

New Delaware Provisions on Bylaws Concerning Stockholder Access to Proxy Materials
The amendments include a new Section 112, which states that a corporation’s bylaws may provide that if the corporation solicits proxies with respect to an election of directors, the corporation may be required to include individuals nominated by stockholders, in addition to individuals nominated by the board of directors. The new statute provides that the right of access to the corporation’s proxy materials may be conditioned on a number of factors or procedures, which may include the following:

• Minimum record or beneficial ownership, or duration of ownership, of shares of the corporation’s capital stock. The bylaws may define beneficial ownership to take into account options or other rights in respect of or related to the corporation’s capital stock.

• Submission of specified information concerning the stockholder and the stockholder’s nominees, including information concerning ownership by such persons of shares of the corporation’s capital stock, or options or other rights in respect of or related to such stock.

• Eligibility for inclusion in the proxy materials based on the number or proportion of directors nominated by the stockholder or whether the stockholder previously sought to require access to the corporation’s proxy materials.[1]

• Prohibitions on nominations if the nominating stockholder, the stockholder’s nominee or any affiliate or associate of the nominating stockholder or nominee has acquired, or has publicly proposed to acquire, shares constituting a specified percentage of the voting power of the corporation’s outstanding voting stock within a specified period before the election of directors.

• A requirement that the nominating stockholder undertake to indemnify the corporation for any losses arising as a result of any false or misleading information or statement submitted by the nominating stockholder.

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Peer Firms in Relative Performance Evaluation

Posted by Jim Naughton, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on
Monday, May 4, 2009
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This post comes from Ana Albuquerque of Boston University.

Agency theory suggests that the compensation of chief executive officers (CEOs) should be linked to firm performance to motivate CEOs to maximize shareholder value. Further, the hypothesis of relative performance evaluation (RPE) states that the firm performance measure used in CEO pay should exclude the component driven by exogenous shocks. Despite much research in this area, the lack of consistent empirical evidence supporting the use of RPE in CEO compensation is an important unresolved puzzle. In my forthcoming Journal of Accounting and Economics paper Peer Firms in Relative Performance Evaluation, I study how the choice of peer group affects tests of RPE, which is a joint test of how incentives are granted and of what constitutes a peer group. Previous tests potentially lack power to detect evidence that supports RPE because peer groups chosen by researchers are incorrect. The challenge in choosing a RPE peer group is to identify the set of firms that are exposed to common shocks and share a common ability to respond to those shocks.

Ideally, a peer group should include firms that are similar along several characteristics (e.g., industry, size, diversification, and financial constraints). Yet considering all such characteristics simultaneously is not practical because it could result in peer groups composed of too few firms, which would be too noisy to filter external shocks. In this paper, I show that industry and firm size capture many of these characteristics. Specifically, when peer groups consist of firms within the same industry and size quartile, my empirical results show systematic evidence supporting RPE usage in CEO pay. The analysis includes both the level and the growth of total compensation flow regressed on firm stock performance, peer stock performance, and control variables.

To compare with previous studies, I test whether RPE is used when measuring peer performance with two common peer group definitions, namely, the S&P 500 index and firms within the same industry. I fail to find consistent evidence of RPE usage with either peer definition. I also find no evidence that accounting returns substitute for RPE in stock returns, or evidence of RPE in accounting returns when using industry-size peers. Last, I test for the presence of RPE when peer groups are formed based on industry plus other firm characteristics, such as diversification, financing constraints, and operating leverage. The evidence is inconsistent with RPE when using such peer groups. Evidence exists to support RPE usage in the level and growth of CEO pay when peers are defined as firms in the same industry and growth options quartile. However, when both industry size and industry-growth options peer performance are included, the results show that only industry-size peer performance is filtered from CEO pay.

The full paper is available for download here.

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