In a new paper, I examine changes in CEO labor market outcomes following corporate environmental misconduct, which creates negative externalities that firms are required by law to prevent. Corporate activities create significant negative environmental externalities. These economic costs can exceed $4.7 trillion a year, are multi-sectoral, and appear through the entire lifecycle of products. Externalities… Read More »
The rising disparity between CEO and worker pay over the past few decades has been attracting considerable attention from academics. Over the last two decades, the CEO to median employee pay ratio has been increasing for small (S&P SmallCap 600), medium (S&P MidCap 400), and large (S&P 500) firms. The literature names the managerial rent… Read More »
A rise in chief executive officer (CEO) compensation in recent decades has attracted intense criticism from the media and public, with a frequent focus on excessive levels of executive compensation relative to rank-and-file employees. In response to such criticism, Congress passed Section 953(b) of the Dodd–Frank Act (hereafter, the pay ratio disclosure mandate) on July… Read More »
Firm owners do not run the firm. Instead, they delegate the job to managers with expertise. Such delegation inevitably gives rise to the misalignment of interests between the firm owners and managers, as the latter do not share the benefits of the firm’s success as much. Shareholders, who are the firm owners, thus need to… Read More »
Hedging marketable risks is a strategic corporate decision. Locking in interest rates, exchange rates, and commodity prices allows the firm’s expected cash flows and margins to be protected against unexpected changes in these variables. For example, firms that strategically hedged against severe energy price changes are now relatively shielded from surging prices. Most empirical studies… Read More »
Since 2004, when the term “ESG” was first used in a report published by the United Nations Global Compact, there has been an explosion of interest in the concept, including in corporate boardrooms. The Global Compact, in a follow-up report the next year, described the emergence of ESG corporate policies as a “powerful and historic convergence … between the objectives… Read More »