Post-acquisition structuring of CEO pay packages: Incentives and punishments

摘要

Posited on the asymmetric features of equity ownership and stock option pay, this article examines the extent to which acquisition activities affect boards of directors' decisions to restructure the incentive design of executive compensation packages in the post-acquisition period. For a recent dataset of 148 deals between 1996 and 2009, the article finds that acquirers' overpayment for target firms and equity financing are likely to require scapegoating, particularly under conditions of intervening poor performance and stronger board vigilance, inducing directors to respond to CEOs' overly risky and suboptimal selection of acquisition terms by enlarging the proportion of equity ownership disincentives at the expense of stock option incentives in executive pay contracts. By linking the incidence of large acquisition deals to an altered agency problem, the article proposes an alternative way to gauge how corporate boards enact their monitoring responsibilities based on CEOs' recent past strategic choies.