# kaal:claim:2097160-019

**Claim.** Because conversion damages both the debt portion and the surviving equity portion of an executive's package at the moment equity matters most for total pay, the combined effect is a strong incentive for executives to lower risk in order to avoid the triggering event.

**Type.** mechanism  **Support.** argued

**Holds when.**

- executive package combines contingent convertible bonds with equity-based compensation

**Source quote.**

> convertible bonds portion is converted and when equity is increasingly important to maintain the overall value of executive compensation.174 The combined effect could be a strong incentive for executives to take lower risks in order to avoid the triggering event.175

**From.** Wulf A. Kaal, *Contingent Capital in Executive Compensation* (2012), V.B.2 The Benefits of Early Triggers, page 42

**Cite as.** Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160

**Verify.** sha256 of source PDF `1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202012%20-%20Contingent%20Capital%20in%20Executive%20Compensation.pdf

**Topics.** risk-and-incentives, ai-and-agents, contingent-capital

**Keywords.** risk-taking, incentive-alignment, conversion, early-trigger

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