Papers by Stephen O'Byrne
Journal of Applied Corporate Finance, Jun 1, 1992
Harvard Deusto business review, 2006
ABSTRACT
Journal of Applied Corporate Finance, Mar 1, 2018
A leading compensation practitioner reviews “Say on Pay” rules, those corporate practices giving ... more A leading compensation practitioner reviews “Say on Pay” rules, those corporate practices giving shareholders the right to vote on executive compensation. The assumption behind “Say on Pay” is that managers may be overpaid because directors fail to provide adequate oversight. O'Byrne questions this underlying assumption.He provides substantial evidence that directors do a poor job overseeing executive pay and that directors have weak incentives to pursue shareholder interests in executive pay. He also finds that “Say on Pay voting is sensitive to differences in pay for performance, but so forgiving that extraordinary pay premiums are required to elicit a majority ‘no’ vote”; and “that three quarters of institutional investors have lower SOP voting quality… than the average investor and almost all have a short‐term focus, with much greater vote sensitivity to current year grant date pay premiums than to long‐term pay alignment and cost.”The common corporate practice of providing competitive target compensation regardless of past performance leads to low alignment of pay and performance. Unfortunately, directors have little incentive to protect shareholder interests “because they are paid labor providers, just like management, not stewards of substantial personal capital.”
Social Science Research Network, 2015
This paper highlights the strengths and weaknesses of the U.S. Securities & Exchange Commissi... more This paper highlights the strengths and weaknesses of the U.S. Securities & Exchange Commission’s (SEC’s) proposed rules on disclosure of pay versus performance, makes several suggestions to improve the proposed rules, presents some surprising data showing that CEO pay is much more highly correlated with gross TSR than relative TSR, explains the importance of “industry beta” in making relative TSR an accurate measure of management performance and shows that for companies with negative industry betas – about one company in six – paying for TSR is paying for management performance. The key weakness of the proposed rules is that the SEC’s interpretation of “compensation actually paid” – the statutory language – undermines the matching of pay and performance periods and makes pay for performance look much worse than it really is. Our key suggestion for improvement is an alternative interpretation that does match pay and performance periods. The paper concludes with a discussion of the comment letter writers who criticize the SEC’s use of TSR as a measure of management performance. They identify the right problem – factors beyond management control – but make unpersuasive arguments for using operating measures instead of relative TSR taking account of industry beta.
Journal of Applied Corporate Finance, Jun 1, 2013
Cantillon and Mann, its affiliates, and Editor of the products advertised. No person should purch... more Cantillon and Mann, its affiliates, and Editor of the products advertised. No person should purchase or sell any security or asset in reliance on any information in this journal. Cantillon and Mann is a full-service financial services company active in the securities, investment management, and credit services businesses. Cantillon and Mann may have and may seek to have business relationships with any person or company named in this journal.
Journal of Applied Corporate Finance, Jun 1, 1995
Journal of Applied Corporate Finance, Jun 1, 1999
ABSTRACT This paper responds to the article by Biddle, Bowen, and Wallace (BBW) by suggesting tha... more ABSTRACT This paper responds to the article by Biddle, Bowen, and Wallace (BBW) by suggesting that their study of EVA and earnings has three potential shortcomings: 1999 Morgan Stanley.
Social Science Research Network, 2011
Although pay for performance is a nearly universal objective of executive compensation programs, ... more Although pay for performance is a nearly universal objective of executive compensation programs, there is little agreement on how to measure it and monitor it. Companies often seem to believe that it is obvious that pay varies with performance, while many investors feel that there is little evidence of a strong correlation between the two. This report explores fi ve interpretations of the "pay for performance" concept, presents a practical way to measure it, assesses the concept's prevalence, and explains how directors can monitor and improve pay for performance at their company. Five Interpretations of "Pay for Performance" An analysis of "pay for performance," as used by the business community, reveals that there are at least five interpretations of the concept.
Social Science Research Network, Jul 6, 2015
Journal of Corporate Accounting & Finance, 1991
This article analyzes a typical CEO's total company-related wealth and quantifies theperformance ... more This article analyzes a typical CEO's total company-related wealth and quantifies theperformance incentiveprovided bya typical executive compensation program. The article shows that the performance sensitivity of the CEO's total company-related wealth is inadequate to provide an effective incentive to maximize shareholder wealth. The article shows how the typical executive compensation program can be changed to provide an effective performance incentive. A TYPICAL COMPETITIVE TOTAL COMPENSATION PROGRAM Analysis of a typical competitive total compensation program for a CEO will help determine whether the program provides an adequate 92
Journal of Applied Corporate Finance, Sep 1, 2019
Journal of Applied Corporate Finance, Mar 1, 2014
Journal of Applied Corporate Finance, Sep 1, 2016
2. More precisely, COV is the value of current earnings and capital, and can be expressed as the ... more 2. More precisely, COV is the value of current earnings and capital, and can be expressed as the sum of book capital and the perpetuity value of current EVA. The perpetuity value of current EVA is EVA/WACC, where WACC is the weighted average cost of capital.
Compensation & Benefits Review, Apr 1, 1990
The role of investor expectations in setting stock prices makes shareholder return a poor measure... more The role of investor expectations in setting stock prices makes shareholder return a poor measure of management performance.
Journal of Applied Corporate Finance, Mar 1, 1996
Journal of Applied Corporate Finance, Aug 20, 2020
Social Science Research Network, Nov 14, 1998
Journal of Applied Corporate Finance, Mar 1, 2006
Journal of Applied Corporate Finance, Sep 1, 2005
Journal of Applied Corporate Finance, Mar 1, 2006
I n their new book entitled Outperform with Expectations-Based Management (John Wiley, 2005), Tom... more I n their new book entitled Outperform with Expectations-Based Management (John Wiley, 2005), Tom Copeland and Aaron Dolgoff argue that conventional approaches to value-based management are flawed because they fail to take account of investor expectations about future performance. Copeland and Dolgoff (henceforth C&D) propose an annual
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Papers by Stephen O'Byrne