Replacing stock options with contingent convertible bonds both lowers total executive compensation and disincentivizes short-termism and the executive focus on quarterly stock price performance.
Source quote, verbatim
If stock options are replaced with CCBs, not only would the total compensation for executives be lowered; short-termism and executives' focus on quarterly stock price performance would also be disincentivized.
Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160
Holds when
contingent convertible bonds substitute for equity-based compensation rather than adding to it
Classification
mechanismsupport: arguedrisk-and-incentives
Related claims
extended_bykaal:claim:2957645-023 Where conversion has a negative effect on stock price, management is further incentivized to maintain and mana...
supported_bykaal:claim:2922176-004 A focus on quarterly earnings and short-term stock price performance distracts an organization from identifyin...
Verify
The quote above is an exact substring of the source PDF, whose sha256 is 1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc. Extraction method: pdf-text-layer. Attestation record: colloquium/attestations/21eb56a2461a7abc...json Verify the binding yourself: curl -s https://wulfkaal.github.io/claims/2097160-025.md | sha256sum