Governance of Executive Compensation and Shareholder Accountability

There are two themes that will spread throughout this course. The first is that compensation is an incentive that drives human behavior. The board has final governance authority over every single aspect of executive compensation and must get all of this right. Compensation, together with tone at the top and the control environment, is integral and fundamental to governance and financial accountability.The second theme of this course is that the board is accountable to shareholders for executive compensation. Shareholders want to see a direct alignment between shareholder wealth maximization and executive reward. Indeed, shareholders now have a “say on pay” (advisory, and mandatory in the UK) and will vote against compensation committee members because boards have, in a number of cases, proven themselves incapable of overseeing compensation properly and regulators have seen fit to enable shareholders to have this say. There is even regulatory movement afoot in Europe as this course is being set for regulators to cap the quantum of executive pay, and implement say on pay as well