ECON-2096EL Chapter Notes - Chapter 6: Currying, Market Power
26 Mar 2017
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Document Summary
Nakamura and vertinsky contrast the standard model of corporate control with the japanese model of corporate control. For some issues, it is very useful to be aware of the managerial power theory of corporate control. Theories of executive compensation can be divided into two main approaches: optimal contracting approach (standard model of corporate control, managerial power approach (japanese model of corporate control) The optimal contracting approach is what nakamure and vertinsky call the standard model of corporate control. Per the optimal contracting approach, boards of directors of firms are assumed to act of behalf of shareholders. Boards of director"s design executive compensation schemes to motivate managers to maximize firms profits on behalf of shareholders. Theories that fall under the oca may recognize challenges that boards of director"s face in designing optimal compensation schemes from the standpoint of shareholder, and they may recognize a gap between the interests of shareholders and the social interest.
