kaal:claim:2097160-025

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.

From

Wulf A. Kaal, Contingent Capital in Executive Compensation (2012), V.B.2 The Benefits of Early Triggers, p. 48
https://ssrn.com/abstract=2097160 · source PDF

Cite as

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_by kaal:claim:2957645-023 Where conversion has a negative effect on stock price, management is further incentivized to maintain and mana...
supported_by kaal:claim:2922176-004 A focus on quarterly earnings and short-term stock price performance distracts an organization from identifyin...

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