Prodded by economists in the 1970s, corporate directors began adding stock options and bonuses to the already-generous salaries of CEOs with hopes of boosting their companies' fortunes. Guided by largely unproven assumptions, this trend continues today. So what are companies getting in return for all the extra money? Not much, according to the empirical data. In Indispensable and Other Myths: Why the CEO Pay Experiment Failed and How to Fix It, Michael Dorff explores the consequences of this development. He shows how performance pay has not demonstrably improved corporate performance and offers studies showing that performance pay cannot improve performance on the kind of tasks companies ask of their CEOs. Moreover, CEOs of large established companies do not typically have much impact on their companies' results. In this eye-opening expose, Dorff argues that companies should give up on the decades-long experiment to mold compensation into a corporate governance tool and maps out a rationale for returning to the era of guaranteed salaries.
Michael Dorff has taught at UCLA School of Law, Rutgers Law School, and the Peter F. Drucker and Masatoshi Ito Graduate School of Management. He is currently Professor of Law at Southwestern Law School, where he teaches corporate law and other business law topics.
ACKNOWLEDGMENTS 1. INTRODUCTION PART I. WHAT'S WRONG WITH THE DOMINANT THEORIES? 2. THE PUZZLES OF CEO COMPENSATION 3. The Corporate Personality Myth 4. MARKET MYTHOLOGY 5. Incentives Mythology PART II. WHAT'S REALLY GOING ON? 6. Performance Pay Mythology 7. Causation Mythology 8. Predictability Mythology PART III. HOW CAN WE BEST REFORM THE SYSTEM? 9. ALIGNMENT MYTHOLOGY 10. MOVING FORWARD Notes Index