KENNETH M. ROSEN, University of Alabama - School of Law
Email: krosen@law.ua.edu

With average Americans perturbed about executive pay, government officials are taking action. Officials appear to be racing against each other to battle corporate excess. The U.S. Securities and Exchange Commission (SEC) engaged in major rulemaking related to the disclosure of executive compensation, and Congress quickly considered executive compensation legislation. More reform, however, is not always better. Concurrent reform by multiple regulators presents perils.

This Article adds to the dialogue about scandal-driven reform. While much discussion exists about the advisability of particular reforms, the focus here is on the process of reform. The Article conducts a comparative analysis of the SEC and House of Representatives' reform processes, which reveals that different policy-making processes may be more or less likely to yield positive reforms. The Article argues that promoting distinct, more delineated roles for certain public actors could improve synergies between regulatory reform efforts.

Part I explores how the SEC's response to the public notice and comment process for its compensation disclosure rulemaking shows how administrative agencies properly can tailor regulation in a deliberative fashion. Part II then provides the contrasting story of the House's passage of H.R. 1257 that illustrates the pitfalls of scandal-driven reform. Unfortunately, the House's actions followed disturbing trends in mandating content for SEC regulation and in failing to account adequately for synergies between concurrent regulatory efforts.

Part III concludes by suggesting a framework identifying when congressional action on business regulation seems most appropriate given concurrent regulatory efforts. The Article identifies Congress's important potential role in settling authority issues, providing oversight to administrative agency reforms, and being prepared to intervene when agencies are recalcitrant about enacting necessary rule changes. In offering this framework, the Article moves beyond executive compensation issues to see how Congress might deal with other crises of confidence in business regulation. Areas for potential application of the framework include the regulation of hedge funds, imported toys and other consumer products, proxy voting, and subprime lending.

ED VAN WESEP, University of North Carolina
Email: vanwesep@unc.edu

This paper investigates the use of a signing bonus as a tool for firms to signal their quality to prospective employees. It is the first to provide a theoretical basis for the signing bonus, one of the most common elements of compensation packages for white collar employees. It also shows that low performance incentives can serve a complementary purpose, implying that within a job/industry pair we should expect higher quality firms to employ higher signing bonuses and lower performance pay. This runs contrary to previous literature relating firm quality to incentive intensity and calls into question the use by empiricists of low performance pay as an indicator of poor corporate governance. The paper makes a number of empirically testable predictions and provides precise guidance on how modelling techniques will affect parameter estimates. In particular, the inclusion of job/industry fixed effects in regressions of signing bonus size or incentive intensity on relevant exogenous variables will reverse the signs of parameter estimates.

WALAYET A. KHAN, University of Evansville
Email: WK3@EVANSVILLE.EDU
JOÃO PAULO VIEITO, Viana do Castelo Polytechnic Institute (IPVC)
Email: joaovieito@esce.ipvc.pt

We examine if gender gap exists in total executive compensation for S&P1500 listed firms from 1992 to 2004. We also investigate if this difference exists in the case of new technology firms, where high scholarship is required for executive positions both for men and women. Additionally, we analyze weather the factors that explain executive compensation for men versus women are the same for S&P listed firms during the sample period.

Our results reveal that women represent only 1.12% of total executive sample in 1992 but it increases to 6.15% in 2004. We also find that the gap between men and women compensation exists but is reducing in later years; the forms of executive compensation for men versus women are different; and in the case of new technology firms the differences in total compensation are not statistically significant.

Although women have been considered more risk averse than men, but shareholders continue to pay women with a similar percentage of risk compensation components, like stock options and restricted stocks, than men. It seems that the shareholders are ignoring to take this factor into account when developing compensation packages for women and men.

Finally we also find that the factors that explain women and men total compensation are not the same for S&P1500 listed firms.

CHRIS ARMSTRONG, Stanford Graduate School of Business
Email: carmstro@stanford.edu
ALAN D. JAGOLINZER, Stanford Graduate School of Business
Email: jagolinzer@stanford.edu
DAVID F. LARCKER, Stanford University
Email: Larcker_David@gsb.stanford.edu

This study examines whether Chief Executive Officer (CEO) equity holdings and equity compensation provide incentives for CEOs to manipulate accounting reports. While several prior studies have examined this important question, the empirical evidence is mixed and the existence of a link between CEO equity incentives and accounting irregularities remains an open question. We examine this research question using a much broader sample to improve power and with refined econometric methods to enhance the validity of our inferences. In contrast to most prior research, we do not find evidence of a positive association between CEOs' equity incentives and accounting irregularities. In fact, we find some evidence that accounting irregularities occur less frequently at firms where CEOs have relatively higher levels of equity incentives. This suggests that, with respect to financial reporting, equity incentives align managers' interests with those of shareholders.