Journal of Business Ethics 85:225 - 237 (2009)
|Abstract||Backdating of stock options is an example of an agency problem. It has emerged despite all the measures (i.e., new regulations and additional corporate governance mechanisms) aimed at addressing such problems? Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary. What ethical measures need to be taken to address the agency problem? What values and norms should guide the board of directors in protecting the shareholders' interests? To examine these issues, we first discuss the role values and norms can play with respect to underlying corporate governance and the proper role of directors, such as transparency, accountability, integrity (which is reflected in proper mechanisms of checks and balances), and public responsibility. Second, we discuss various stakeholder approaches (e.g., government, directors, managers, and shareholders) by which conflicts of interest (i.e., the agency problem) can be addressed. Third, we assess the practice of backdating stock options, as an illustration of the agency problem, in terms of whether the practice is legally acceptable or ethically justifiable. Fourth, we proceed to an analysis of good corporate governance practice involving backdating options based on a series of ethical standards including: (1) trustworthiness; (2) utilitarianism; (3) justice; and (4) Kantianism. We conclude that while executive compensation schemes (e. g., stock options) were originally intended to help remedy the agency problem by tying together the interests of the executives and shareholders, these schemes may have actually become "part of the problem," and that the solution ultimately depends upon whether directors and executives accept that all of their actions must be based on a set of core ethical values|
|Keywords||No keywords specified (fix it)|
|Through your library||Configure|
Similar books and articles
Avinash Arya & Huey-Lian Sun (2004). Stock Option Repricing: Heads I Win, Tails You Lose. Journal of Business Ethics 50 (4):297-312.
Kiridaran Kanagaretnam, Robert Mathieu & Ramachandran Ramanan (2004). Outside Director Remuneration and the Decision to Grant CEO Stock Options. International Journal of Business Governance and Ethics 1 (s 2-3):137-146.
Donald Grunewald (2008). The Sarbanes-Oxley Act Will Change the Governance of Non Profit Organizations. Journal of Business Ethics 80 (3):399 - 401.
Andrew J. Felo (2001). Ethics Programs, Board Involvement, and Potential Conflicts of Interest in Corporate Governance. Journal of Business Ethics 32 (3):205 - 218.
Mark S. Schwartz, Thomas W. Dunfee & Michael J. Kline (2005). Tone at the Top: An Ethics Code for Directors? Journal of Business Ethics 58 (1-3):79 - 100.
Catherine M. Daily (2001). Director Stock Compensation. Business Ethics Quarterly 11 (1):89-108.
Ella Mae Matsumura & Jae Yong Shin (2005). Corporate Governance Reform and CEO Compensation: Intended and Unintended Consequences. Journal of Business Ethics 62 (2):101 - 113.
Kiridaran Kanagaretnam, Gerald J. Lobo & Emad Mohammad (2009). Are Stock Options Grants to Ceos of Stagnant Firms Fair and Justified? Journal of Business Ethics 90 (1):137 - 155.
James J. Angel & Douglas M. McCabe (2008). The Ethics of Managerial Compensation: The Case of Executive Stock Options. Journal of Business Ethics 78 (1-2):225 - 235.
Norman D. Bishara & Cindy A. Schipani (2009). Strengthening the Ties That Bind: Preventing Corruption in the Executive Suite. Journal of Business Ethics 88:765 - 780.
Added to index2009-01-28
Total downloads33 ( #36,649 of 551,105 )
Recent downloads (6 months)1 ( #63,341 of 551,105 )
How can I increase my downloads?