جهانی سازی و تکامل حاکمیت شرکتی Globalization and the Evolution of Corporate Governance

1 Introduction Real compensation of executives in S&P 500 firms increased by more than 350 percent on average between 1990 and 2006. Meanwhile, improvements in corporate governance to prevent or punish adverse managerial behavior have been rather scarce.1 These developments have led to widespread concerns among academics and policy makers that managers are rewarded independently of firm performance. During good times, executives are rewarded with high payments and whenever firms perform poorly, executives frequently do not need to fear any severe consequences. Many economists have argued that increases in the level of executive compensation are due to tougher competition for managerial talent. Competition for managerial talent between firms has been rising over time, extensively due to globalization.2 However, there is also substantial concern that the rise of executive pay partly originates from managers that are so powerful that they can skim away rents and entrench themselves against punishments by shareholders.3 The contribution of this paper is twofold. I first present a model that introduces agency problems with endogenous corporate governance investments into an industry equilibrium model with monopolistic competition. I use the model to illustrate that globalization can account for a deterioration of corporate governance in the economy and a reliance on performance payments to incentivize managers. Additionally, the model suggests that this globalization-induced organizational response of firms can reduce the welfare gains from globalization as it mutes the entry of additional firms and raises price levels. Since managerial agency problems can impose substantial costs on society,4 it is crucial to understand the mechanisms how markets shape the decisions of firms to provide incentives. Second, I use data on corporate governance provisions in a sample of large U.S. corporations in the manufacturing sector between 1990 and 2006 to provide empirical evidence that is consistent with the model predictions.