Much has been written and said about salaries and bonuses received by executives. No doubt the current crisis stigmatizes a number of practices designed to reward performance and to align compensation with the mighty objective of profit maximization for corporations: they give way to excess. The demise of Enron and of Lehman Brothers, the revelations that followed, the fraudulent use of accounting mechanisms, the dubious role of lawyers and advisers - all place the issue of compensation at the very heart of a necessary review of corporate governance. Executives and professional advisers - including lawyers - are under surveillance and the law is one instrument through which the state may take action.
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Modern compensation schemes have long reflected the prevailing legal school of thought on the goal and nature of the corporation, one grounded in legal, economic and political literature derived from the Chicago School. Within this tradition, corporate governance is examined through the lens of cost-efficiency mechanisms, in isolation or to the exclusion of other parameters. This view is still predominant today. Many scholars in law and economics still continue to ignore studies of corporate governance that do not deal with economic performance (e.g. social and ethical approaches of director remuneration).
Once the basic premise of profit maximization is challenged, the prevalent justification for compensation becomes questionable. The exercise cannot consist only of aligning the company's performance with remuneration. Even if we assume this apportionment method to be desirable, it does not accurately reflect the practice of compensation and bonuses. Recent legal cases and management literature clearly demonstrate the frequent disconnect between senior executive compensation and a company's financial performance.
This conference will explore the theoretical and practical justifications underlying executive compensation mechanisms in light of broader questions surrounding the role of corporations in society and corporate governance. Questions of corporate liability combined with that of its directors and professional advisors has revived the late 19th to mid-20th century debate surrounding the status of corporations, not only as subjects of rights but of obligations as well.