Category: Finance

CEO pay is clearly out of whack: Here’s how to fix it

In 1980, the average American CEO made about 42 times more than the average American worker. In 2011, the CEO made about 380 times more. CEO pay continued to rise significantly every year in the last half of the 2000s, even as corporate profits were falling. And therein lays the problem, say experts: CEO pay increases about 15-20 percent per year, seemingly unrelated to performance. Fortunately, said Carr Bettis, research professor of finance at the W. P. Carey School of Business, people are finally talking about the issue and calling for a relationship between actual pay and performance, as well as actual pay that is “reasonable” relative to comparative companies.

Who are you? How professional background affects CEO pay

CEOs are in the spotlight today. In a time of economic hardship, their outsized salaries make them targets of criticism and resentment. When their companies succeed, CEOs are celebrated, but when firms fail, these executives are saddled with blame. Cláudia Custódio, assistant professor in the W. P. Carey School’s Finance Department, is trying to discover the real truths about chief executive officers — what in their backgrounds led them to their positions, why they receive such handsome salaries, and how they contribute to the success of their organizations.

Why do investors sometimes make bad investment choices?

Individual investors sometimes make decisions that are “irrational”—   mistakes they know they shouldn’t be making. So what causes investors to make these mistakes? What causes some investors to be less prone to biased investment decision making and others to be more susceptible to it? Is there anything that can be done to moderate such behavior? Research by visiting finance professor Stephan Siegel considers whether genetics may have a role.

Debt crisis: Similarities, differences and lessons learned from the U.S. and Europe

In 2008, the credit crisis in the United States propelled shock waves across the Atlantic to Europe. Europe’s current debt crisis could send damaging waves to America’s shores as well, according to international finance experts at the W. P. Carey School of Business. In wide-ranging interviews, these experts discussed the threat the European crisis poses to the United States, how the U.S. crisis may have contributed to Europe’s woes, and whether European leaders are even now recognizing the lessons of the US experience.

Performance goals for CFOs returning to pre-downturn norms

During the financial crisis and the resulting recession, companies set tough targets for their CFOs, refusing, in some cases, to give bonuses unless companies reported positive earnings, accounting professor Michal Matejka says. In a time when a lot of firms were reporting losses by no fault of their own, that meant that some CFOs probably didn’t receive the sorts of bonuses that they had in the past. But they could breathe easier last year, as the performance goals set for them in their compensation plans got a little easier to achieve, according to Matejka’s new research.

Taking stock: Are employee options good for business?

More American companies, especially start-ups and those in the technology industry, are offering broad-based employee stock options as part of their compensation packages. As the market recovers, many workers view stock options as a way to get a piece of their company’s action and share a stake in its overall performance. But what’s in it for employers? Laura Lindsey, Ilona Babenko and Yuri Tserlukevich of the W. P. Carey School’s department of finance have researched aspects of employee stock options and found that tax advantages and employee engagement are among the benefits to companies.