# kaal:claim:2097160-037

**Claim.** Contrary to Gordon's view that contingent convertible bonds do not address the Fuld Problem, if executive packages do not include a large equity portion, managers have no incentive to block an equity infusion in order to preserve the value of their own equity.

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

**Holds when.**

- a large part of equity-based executive compensation is replaced with contingent convertible bonds

**Source quote.**

> If executives' compensation packages do not include a large equity portion, managers have no incentive to avoid an equity infusion to preserve the value of their own equity.257

**From.** Wulf A. Kaal, *Contingent Capital in Executive Compensation* (2012), VI.B Improving the Creditor-Centered Approach, page 65

**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.** institutional-design

**Keywords.** fuld-problem, equity-infusion, dilution, lehman-brothers

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