_________________________________________________________________

  E M P L O Y E E   B E N E F I T S ,   C O M P E N S A T I O N
                    &   P E N S I O N   L A W
               Vol. 4,  No. 18: September 25, 2003
_________________________________________________________________

Publisher:     LSN Employment, Labor, Compensation & Pension Journals
               a division of
               Social Science Electronic Publishing, Inc. (SSEP)
               and Social Science Research Network (SSRN)

Editor:        PAMELA PERUN
               Urban Institute
               Mailto:pamela@planetnow.com

Copyright:     SSEP, Inc. 2003. All rights reserved.

Leading Social Science Research Delivered To Your Desktop
               http://www.SSRN.Com/

   ___________________________________________________________

                      Topic of This Issue:
                     Executive Compensation
   ___________________________________________________________


SEARCHING THE SSRN ELECTRONIC LIBRARY
 To search the entire SSRN Electronic Library by author, title,
 JEL code, or full text of the abstracts in our database, please
 visit http://papers.ssrn.com/

 To browse all abstracts published in this journal, please visit
 http://www.ssrn.com/link/benefits-compensation-pension-law.html

REDISTRIBUTION
 Individual and professional subscriptions to the journal are for
 single users. It is a violation of copyright to redistribute
 this document electronically or otherwise without the explicit
 permission of Social Science Electronic Publishing, Inc.
 Site licenses for organizations are available by contacting
 Mailto:Site@SSRN.Com

SIGN OFF
 To stop delivery of one or more of the SSRN journals, write to
 Mailto:Remove@SSRN.Com Include the JOURNAL name or the NETWORK
 name or ALL in the subject line. If your address has changed, let
 us know by writing to Mailto:AddressChg@SSRN.Com

ALIGNMENT
 If this document is misaligned, please set type face to a
 non-proportional font such as Courier 10.

PAPER DOWNLOADS
 If you need assistance downloading papers from our web site,
 please contact Mailto:Support@SSRN.Com


T A B L E   of   C O N T E N T S
_________________________________________________________________


NEW and FORTHCOMING ARTICLES

"The Relation Between Insider-Trading Restrictions and Executive
 Compensation"
      Journal of Accounting Research, Vol. 41, No. 3, June 2003
     DARREN T. ROULSTONE
        University of Chicago
        Graduate School of Business


"Stock Options for Tax-Exempt Organization Managers?"
      Tax Notes, Vol. 100, No. 12, September 22, 2003
     DAVID I. WALKER
        Boston University School of Law


"Taxing Compensatory Partnership Options"
      Tax Notes, Vol. 100, No. 12, September 22, 2003
     KAREN C. BURKE
        University of San Diego School of Law

WORKING PAPERS

"Executive Compensation and Analyst Guidance: The Link Between
 CEO Compensation and Expectations Management"
     GUIDO BOLLIGER
        University of Neuchatel - Institut de l'Entreprise
        International Center FAME
     MANUEL KAST
        University of Lausanne - HEC
        International Center FAME


"Executive Remuneration in the EU: Comparative Law and Practice"
     GUIDO ALESSANDRO FERRARINI
        University of Genoa
        Law School
        European Corporate Governance Institute (ECGI)
     NIAMH MOLONEY
        Stockholm University
        School of Law
        European Corporate Governance Institute (ECGI)
     CRISTINA VESPRO
        ECARES, Université Libre de Bruxelles
        European Corporate Governance Institute (ECGI)


"Incentive Compensation for Bank Directors: The Impact of
 Deregulation"
     DAVID A. BECHER
        Drexel University
        Department of Finance
     TERRY L. CAMPBELL
        University of Delaware
        Department of Finance
     MELISSA FRYE
        University of Central Florida
        College of Business Administration


"UK Executive Compensation Practices: New Economy vs. Old
 Economy"
     KONSTANTINOS STATHOPOULOS
        University of Manchester
        Manchester School of Accounting Finance
     SUSANNE K. ESPENLAUB
        University of Manchester
     MARTIN WALKER
        University of Manchester
        Manchester School of Accounting Finance


"Executive Compensation, Political Economy, and Managerial
 Control: The Transformation of Managerial Incentive Structures
 and Ideology, 1950-2000"
     ERNIE ENGLANDER
        George Washington University
        Department of Strategic Management & Public Policy
     ALLEN KAUFMAN
        University of New Hampshire
        Whittemore School of Business and Economics


S S R N   I N F O R M A T I O N
_________________________________________________________________

          * Partners in Publishing
          * Administrative Information
             - Missing issues & change of address
             - Solicitation of abstracts
          * Directors
          * Subscription to SSRN Journals
_________________________________________________________________

ACQUIRING PAPERS
 Download papers directly from the included web address or contact
 the author or other contact person directly. Provide an address
 to which the author or other contact person can send a paper
 copy and mention that you saw the abstract in SSRN. Some of
 SSRN's Partners in Publishing require a subscription or charge a
 fee for electronic downloads.



EDITORIAL POLICIES
 To provide the broadest coverage of research in Employee
 Benefits, Compensation & Pension Law we do not referee working
 papers. We accept abstracts of working papers in Employee
 Benefits, Compensation & Pension Law whose topics suit the
 coverage of the journal and which are part of the worldwide
 scholarly discourse.


N E W   and   F O R T H C O M I N G   Articles
_________________________________________________________________

"The Relation Between Insider-Trading Restrictions and Executive
 Compensation"
      Journal of Accounting Research, Vol. 41, No. 3, June 2003

      BY:  DARREN T. ROULSTONE
              University of Chicago
              Graduate School of Business

 Contact:  DARREN T. ROULSTONE
   Email:  Mailto:DARREN.ROULSTONE@GSB.UCHICAGO.EDU
  Postal:  University of Chicago
           Graduate School of Business
           1101 East 58th Street
           Chicago, IL 60637  UNITED STATES
   Phone:  773-834-5966

ABSTRACT:
 In this study I investigate the relation between firm-level
 insider-trading restrictions and executive compensation. Using a
 trading-window proxy for the existence of such restrictions, I
 test predictions that insiders will demand compensation for
 these restrictions and that firms will need to increase
 incentives to restricted insiders. I find that firms that
 restrict insider trading pay a premium in total compensation
 relative to firms not restricting insider trading, after
 controlling for economic determinants of pay. Furthermore, these
 firms use more incentive-based compensation and their insiders
 hold larger equity incentives relative to firms that do not
 restrict insider trading. These results hold after controlling
 for the endogenous decision to restrict insiders and are
 consistent with the notion that insider trading plays a role in
 rewarding and motivating executives.

 Keywords: insider trading, executive compensation, contracting


JEL Classification: G30, J33
______________________________

"Stock Options for Tax-Exempt Organization Managers?"
      Tax Notes, Vol. 100, No. 12, September 22, 2003

      BY:  DAVID I. WALKER
              Boston University School of Law

 Contact:  DAVID I. WALKER
   Email:  Mailto:diwalker@bu.edu
  Postal:  Boston University School of Law
           765 Commonwealth Avenue
           Boston, MA 02215  UNITED STATES

ABSTRACT:
 Recently promulgated regulations under section 457 (Deferred
 Compensation Plans of State and Local Governments and Tax-Exempt
 Organizations) will put an end to tax-exempt organizations' use
 of options on third-party stock or mutual funds as an executive
 compensation device. These regulations have sparked protests
 from exempt organizations and option plan promoters, and a bill
 has been introduced in Congress that would overturn the
 regulations. In this article, Professor Walker argues in favor
 of the new regulations as a matter of tax policy and good
 corporate governance. Professor Walker argues that (1) exempt
 organization options are only superficially similar to public
 company stock options and have been provided solely as a means
 of avoiding the dollar limitation on qualified deferred
 compensation under section 457, (2) the limitation under section
 457 is justified and should be protected because, unlike public
 company stock options, exempt organization deferred
 compensation, including options, results in a fairly certain
 drain on the public fisc, and (3) option compensation raises
 very troubling governance issues for exempt organizations:
 Options are much less transparent than cash, are susceptible to
 being undervalued, and are difficult and costly to hedge. For
 all of these reasons, Professor Walker argues that the Treasury
 was justified in effectively eradicating exempt organization
 options, and that Congress should refrain from resuscitating
 them.

______________________________

"Taxing Compensatory Partnership Options"
      Tax Notes, Vol. 100, No. 12, September 22, 2003

      BY:  KAREN C. BURKE
              University of San Diego School of Law

 Contact:  KAREN C. BURKE
   Email:  Mailto:BURKEK@SANDIEGO.EDU
  Postal:  University of San Diego School of Law
           5998 Alcala Park
           San Diego, CA 92110-2492  UNITED STATES
   Phone:  619-260-7717
     Fax:  619-260-2218

ABSTRACT:
 In this article, Burke considers the tax treatment of
 partnership options issued in connection with performance of
 services (compensatory option). In particular, Burke discusses
 whether compensatory options should be taxed by analogy to a
 vesting partnership profits interest or a transfer of property
 under section 83. Recently issued proposed regulations treat
 exercise of a noncompensatory option as generally tax-free to
 both the option holder and the partnership and provide rules for
 adjusting the partners' capital accounts to reflect a
 noncompensatory capital shift. In light of the proposed
 regulations, Burke discusses the contentious issue of whether
 exercise of a compensatory option should be treated, under
 section 721, as a taxable capital shift, triggering recognition
 of gain to the historic partners. By contrast, the
 circle-of-cash theory would permit the historic partners to
 avoid gain recognition, by analogy to the treatment of corporate
 options under section 1032. Although the circle-of-cash theory
 has numerous adherents, Burke suggests that a recognition rule
 may be warranted to prevent the historic partners from investing
 in services with unrealized appreciation and suggests a
 deemed-sale approach based on section 704(c) principles.
 Ultimately, the proper treatment of compensatory options cannot
 be divorced from the overarching problem of service-related
 transfers of partnership interests.

______________________________

W O R K I N G   P A P E R   Abstracts
_________________________________________________________________

"Executive Compensation and Analyst Guidance: The Link Between
 CEO Compensation and Expectations Management"

      BY:  GUIDO BOLLIGER
              University of Neuchatel - Institut de l'Entreprise
              International Center FAME
           MANUEL KAST
              University of Lausanne - HEC
              International Center FAME

Document:  Available from the SSRN Electronic Paper Collection:
           http://papers.ssrn.com/paper.taf?abstract_id=424026

Paper ID:  EFA 2003 Annual Conference Paper No. 861
    Date:  June 2003

 Contact:  GUIDO BOLLIGER
   Email:  Mailto:Guido.Bolliger@unine.ch
  Postal:  University of Neuchatel - Institut de l'Entreprise
           Fbg de l'Hopital 77
           Neuchatel 2000,    SWITZERLAND
   Phone:  ++41 32 718 13 60
     Fax:  ++41 32 718 13 61
 Co-Auth:  MANUEL KAST
   Email:  Mailto:Manuel.Kast@hec.unil.ch
  Postal:  University of Lausanne - HEC
           CH-1015 Lausanne,    SWITZERLAND

ABSTRACT:
 During the last decade, a surprisingly high percentage of U.S.
 companies has fulfilled or beaten analysts' earnings per share
 forecasts. One of the most frequently cited reasons for this
 growing tendency is a change in the nature of U.S. executive
 compensation structure. As stock options have become an
 increasingly important part of executive compensation, the
 preservation or enhancement of short term stock value around the
 earnings announcement has become a priority for managers.
 Besides earnings management, a widespread way to meet analyst
 expectations is to inject pessimism into their forecasts by
 providing analysts with negative clues, or so-called downward
 guidance. This paper is the first to investigate the
 relationship between the practice of analyst guidance and
 executive compensation packages. We document a strong link
 between expectations management and the relevant options
 component of CEO compensation, bonus plans, and the percentage
 of the company's shares owned by the CEO who manages it. In a
 second set of tests, we show that firms which meet or beat
 analyst forecasts at the earnings announcement generate positive
 abnormal returns, which are significantly lower for firms
 suspected of managing expectations.

 Keywords: Analyst guidance, Earnings surprise, Executive
 compensation, Stock options

______________________________

"Executive Remuneration in the EU: Comparative Law and Practice"

      BY:  GUIDO ALESSANDRO FERRARINI
              University of Genoa
              Law School
              European Corporate Governance Institute (ECGI)
           NIAMH MOLONEY
              Stockholm University
              School of Law
              European Corporate Governance Institute (ECGI)
           CRISTINA VESPRO
              ECARES, Université Libre de Bruxelles
              European Corporate Governance Institute (ECGI)

Document:  Available from the SSRN Electronic Paper Collection:
           http://papers.ssrn.com/paper.taf?abstract_id=419120

Paper ID:  ECGI - Law Working Paper No. 09/2003
    Date:  June 2003

 Contact:  GUIDO ALESSANDRO FERRARINI
   Email:  Mailto:guido.ferrarini@cedif.org
  Postal:  University of Genoa
           Law School
           Via Balbi, 22
           Genoa 16126,    ITALY
   Phone:  +39-010-2099894
     Fax:  +39-010-2099890
 Co-Auth:  NIAMH MOLONEY
   Email:  Mailto:niamhmoloney@eircom.net
  Postal:  Stockholm University
           School of Law
           28 University Square
           Belfast  BT7 1NN,    IRELAND
 Co-Auth:  CRISTINA VESPRO
   Email:  Mailto:cvespro@ulb.ac.be
  Postal:  ECARES, Université Libre de Bruxelles
           Ave. Franklin D Roosevelt, 50 - C.P. 114
           B-1050 Brussels,    BELGIUM

Paper Requests:
 Contact Christine Miller, Administrator, European Corporate
 Governance Institute at Mailto:wp-hardcopyrequest@ecgi.org.

ABSTRACT:
 Executive pay practices are currently a "cause celebre" of
 corporate governance in the media, among regulators, in the
 marketplace, and in academia, in the US, the UK, and Europe. The
 purpose of this paper is to examine the approaches taken across
 Europe to the regulation of executive pay practices in listed
 companies. The outstanding feature of the regulation of
 executive pay across Europe is the extent to which it reflects
 the interconnection between pay and corporate governance. This
 link is expanded on in Part B with respect to the different
 rules found across European legal systems and how they
 address/prioritize the concerns which executive pay potentially
 raises. The role of public regulation is relatively important
 for disclosure of executive pay, while best practices and
 private codes generally have some impact on the way in which
 executive compensation is set for listed companies. On the
 whole, there is some convergence in continental Europe towards
 the Anglo-American model. The merits of full disclosure of
 executive remuneration are increasingly acknowledged in
 corporate governance codes and reports, while the use of
 remuneration committees is on the rise in the Continent. The
 research data on reported pay practices for 2001 among FTSE
 Eurotop300 companies reveal a reliance on performance-based pay
 generally and a somewhat variable adoption of share options
 programmes and other equity-based incentive contracts, which are
 generating difficulties in dispersed ownership systems. The
 executive pay problem may therefore be a particular cost of
 dispersed ownership, and the particular legal and policy
 responses, which are widely debated a specific feature of
 Anglo-American corporate governance. Nonetheless, the faultline
 between both systems, which is evident from the different
 approaches European states have taken, calls for particular care
 in the adoption of pan-European reforms but also in the
 transplanting of reforms based on the Anglo-American
 experience.

 Keywords: Executive pay, Corporate governance, Ownership
 structure, Company disclosure, Remuneration Committee


JEL Classification: G3, G38, J33, K22
______________________________

"Incentive Compensation for Bank Directors: The Impact of
 Deregulation"

      BY:  DAVID A. BECHER
              Drexel University
              Department of Finance
           TERRY L. CAMPBELL
              University of Delaware
              Department of Finance
           MELISSA FRYE
              University of Central Florida
              College of Business Administration

Document:  Available from the SSRN Electronic Paper Collection:
           http://papers.ssrn.com/paper.taf?abstract_id=425441

Paper ID:  Weinberg Center for Corporate Governance Working Paper
           No. 2003-2
    Date:  July 17, 2003

 Contact:  MELISSA FRYE
   Email:  Mailto:melissa.frye@bus.ucf.edu
  Postal:  University of Central Florida
           College of Business Administration
           Department of Finance
           PO Box 161400
           Orlando, FL 32816  UNITED STATES
   Phone:  407-823-3097
 Co-Auth:  DAVID A. BECHER
   Email:  Mailto:becher@drexel.edu
  Postal:  Drexel University
           Department of Finance
           218 Academic Bldg.
           Philadelphia, PA 19104  UNITED STATES
 Co-Auth:  TERRY L. CAMPBELL
   Email:  Mailto:campbelt@be.udel.edu
  Postal:  University of Delaware
           Department of Finance
           College of Business and Economics
           Alfred Lerner College of Business and Economics
           Newark, DE 19716  UNITED STATES

ABSTRACT:
 Although industry deregulation leads to changes in the scale and
 scope of the duties of the board of directors, little is known
 about the changes in incentives for directors surrounding such
 events. The deregulation of the U.S. banking industry and
 associated technological and regulatory changes during the 1990s
 lends itself to a natural experiment. These industry shocks
 forced bank boards of directors to face expanded opportunity
 sets, increased competition, and a rapidly expanding market for
 corporate control. While bank directors receive significantly
 less equity-based compensation throughout most of our sample
 period, by the end of the decade their use of equity-based
 compensation is indistinguishable from a matched sample of
 industrial firms. Moreover, banks utilizing a high degree
 equity-based compensation for directors are associated with
 higher performance and higher growth without a similar increase
 in risk. The increase in the use of equity-based compensation
 for bank directors is not due to a fundamental shift in bank
 boards, as board size and independence have remained static.
 Overall, our results suggest that firms respond to deregulation
 by improving internal monitoring through aligning directors'
 incentives with those of shareholders.

 Keywords: Boards of Directors, Director Compensation,
 Equity-based Compensation, Banking, Deregulation


JEL Classification: G30, G34, G21
______________________________

"UK Executive Compensation Practices: New Economy vs. Old
 Economy"

      BY:  KONSTANTINOS STATHOPOULOS
              University of Manchester
              Manchester School of Accounting Finance
           SUSANNE K. ESPENLAUB
              University of Manchester
           MARTIN WALKER
              University of Manchester
              Manchester School of Accounting Finance

Document:  Available from the SSRN Electronic Paper Collection:
           http://papers.ssrn.com/paper.taf?abstract_id=422761

Paper ID:  University of Manchester, MSAF, Working Paper
    Date:  June 2003

 Contact:  KONSTANTINOS STATHOPOULOS
   Email:  Mailto:k.stathopoulos@stud.man.ac.uk
  Postal:  University of Manchester
           Manchester School of Accounting Finance
           Crawford House
           Oxford Road
           Manchester M13 9PL,    UNITED KINGDOM
   Phone:  +44 161 275 4010
     Fax:  +44 161 275 4023
 Co-Auth:  SUSANNE K. ESPENLAUB
   Email:  Mailto:susanne.espenlaub@man.ac.uk
  Postal:  University of Manchester
           Manchester School of Accounting and Finance
           Manchester M13 9PL,    UNITED KINGDOM
 Co-Auth:  MARTIN WALKER
   Email:  Mailto:martin.walker@man.ac.uk
  Postal:  University of Manchester
           Manchester School of Accounting Finance
           Crawford House
           Oxford Road
           Manchester M13 9PL,    UNITED KINGDOM

ABSTRACT:
 This paper examines the executive compensation practices of
 listed UK retailing companies. We compare New Economy retailers
 (e-commerce and dot.coms) to more traditional retailers
 operating in the "Old Economy". We also discriminate between
 recently floated retailers and their more seasoned counterparts.
 Using a sample of remuneration contracts for 552 CEOs, other
 executives and non-executives in 72 listed UK companies in the
 New and Old Economy, we investigate the structure and level of
 executive (and non-executive) compensation defined as the sum of
 salary, annual bonus, and the values of executive stock options
 and long-term incentive plans (LTIPs). We investigate the extent
 to which the contract features are determined by firm
 characteristics, economic sector and the composition of the
 remuneration committee. The contract features we examine are the
 time to maturity of the executive stock options, whether options
 were granted in-, at- or out of the money, and the leverage of
 the compensation package (in terms of the director's wealth
 gains through increases in the value of stock options and LTIPs
 relative to the director's cash pay). In stark contrast to US
 findings and to UK corporate governance guidelines, we find
 evidence that a large proportion of sample firms, particularly
 in the New Economy, issue executive stock options in-the-money,
 and that the composition of the remuneration committee has a
 significant impact on the moneyness of stock options.

 Keywords: Managerial Compensation, Remuneration Committee,
 Executive Stock Options, New Economy


JEL Classification: G30, G35, J33
______________________________

"Executive Compensation, Political Economy, and Managerial
 Control: The Transformation of Managerial Incentive Structures
 and Ideology, 1950-2000"

      BY:  ERNIE ENGLANDER
              George Washington University
              Department of Strategic Management & Public Policy
           ALLEN KAUFMAN
              University of New Hampshire
              Whittemore School of Business and Economics

Document:  Available from the SSRN Electronic Paper Collection:
           http://papers.ssrn.com/paper.taf?abstract_id=408820

Paper ID:  George Washington University SMPP Working Paper No.
           03-01
    Date:  January 2003

 Contact:  ERNIE ENGLANDER
   Email:  Mailto:ejeeje@gwu.edu
  Postal:  George Washington University
           Department of Strategic Management & Public
           Policy
           203 Monroe Hall
           Washington, DC 20052  UNITED STATES
   Phone:  202-994-8203
     Fax:  202-994-8113
 Co-Auth:  ALLEN KAUFMAN
   Email:  Mailto:allenkaufman@attbi.com
  Postal:  University of New Hampshire
           Whittemore School of Business and Economics
           15 College Road
           Durham, NH 03824  UNITED STATES

ABSTRACT:
 We characterize the period from the end of World War Two to the
 early 1980s as technocratic and the period since as proprietary.
 During the technocratic period, compensation differences between
 CEOs and senior management were "marginal" in that they
 reflected their economic contributions to the firm. This
 facilitated team cohesion among the senior managers, who, like
 the CEO, had membership "rights" to the board over which they,
 as a team, controlled. Though constrained by antitrust
 regulations, managers shared knowhow across industries and built
 a corporate-wide identity through a system of interlocking
 directorates. While this network educated its participants in
 corporate-wide issues, those within it still identified first
 and foremost with their firm, where they spent most of their
 career. Finally, managers continued to conceive of their
 profession as one that served a larger social good. First, they
 accepted a legal duty of care to further the interests of the
 corporation as a whole. An secondly, they a second fiduciary
 duty to advance democracy. In contrast, the coalesced
 proprietary system has encouraged managers to think of
 themselves as a special class of shareholders. The extensive use
 of stock options to supplement their base salary has contributed
 heavily to this shareholder (as opposed to technocratic)
 managerial self-definition. This occurred as managers weighted
 their compensation packages with stock options to take advantage
 of an explosive equities market and alterations in the tax code.
 As "insider shareholders" who aimed merely to enhance their
 personal fortunes, managers turned their internal labor market
 into a contest for the prized CEO position. The compensation
 differential between the one who wins and those who lose have
 become substantial. Indeed, winners receive packages so large
 that they enter into the truly privileged sector of the very
 rich - the top 1 percent of the general population.

 Keywords: Corporate Governance, Executive Compensation,
 Business History