The incentive effects of accounting based long-term performance plans

Article Abstract:

The validation of the incentive hypothesis was achieved with the help of accounting-based performance measures, such as earnings per share, rate of return on assets, return on equity and stock returns. The hypothesis, which claims that giving of long-term performance contracts to top management is undertaken to create incentives to maximize shareholder value, was validated based on assessment of the time series performance of 175 companies that have adopted long-term performance plans between 1971 and 1980. It was observed that all performance indicators for the test companies improved compared to prior performance.

Financial Management, Models, Accounting, Incentives (Business)

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Ethics, institutions, and business relations: a study of collusive incentives for institutional shareholders to monitor firm managers

Article Abstract:

Institutional investors that own only a small stake in a company tend to support management when it comes to preserving other business relations. However, as their stake in a company grows, such investors should learn to monitor management in a more active manner since they have much to gain from their increased equity ownership. A simplified hierarchy model involving a principal, an institutional investor and a manager is used to explain collusion between a monitoring institution and a firm manager.

Executives

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Stakeholders versus stockholders and financial ethics: ethics to whom?

Article Abstract:

Shareholder wealth may be maximized at the cost of other stakeholders for society's benefit. In this regard, maximizing shareholder wealth is ethical because it enhances the overall welfare of society, although it runs counter to the stakeholder theory concept of ethical behavior. However, the latter concept could not be characterized as ethical since it undermines managers' fiduciary obligation to shareholders.

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