The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Fri, 10 Apr 2026 11:31:54 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Principles for Tying Equity Compensation to Long-Term Performance – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Principles for Tying Equity Compensation to Long-Term Performance https://corpgov.law.harvard.edu/2010/05/04/principles-for-tying-equity-compensation-to-long-term-performance/?utm_source=rss&utm_medium=rss&utm_campaign=principles-for-tying-equity-compensation-to-long-term-performance https://corpgov.law.harvard.edu/2010/05/04/principles-for-tying-equity-compensation-to-long-term-performance/#comments Tue, 04 May 2010 13:29:43 +0000 http://blogs.law.harvard.edu/corpgov/?p=8957?d=20150106104226EST Posted by Lucian Bebchuk and Jesse Fried, Harvard Law School, on Tuesday, May 4, 2010
Editor's Note:

Lucian Bebchuk is the William J. Friedman and Alicia Townsend Friedman Professor of Law, Economics, and Finance at Harvard Law School. Jesse Fried is a Professor of Law at Harvard Law School. This post builds on their discussion paper Paying for Long-Term Performance, issued by the Harvard Law School Program on Corporate Governance, which is available here.

In our recent study, Paying for Long-Term Performance, we provide a detailed blueprint for how equity-based compensation should be designed to tie executive payoffs to long-term results and to avoid excessive risk-taking incentives. Our conclusions can be distilled into the following eight “principles:”

  • 1. Executives should not be free to unload restricted stock and options as soon as they vest except to the extent necessary to cover any taxes arising from vesting.
  • 2. Executives’ ability to unwind their equity incentives should not be tied to retirement.

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