Entrenchment and Severance Pay in Optimal Governance Structures

  title={Entrenchment and Severance Pay in Optimal Governance Structures},
  author={A. Almaz{\'a}n and J. S{\'u}arez},
  journal={Journal of Finance},
  • A. Almazán, J. Súarez
  • Published 2001
  • Business, Computer Science
  • Journal of Finance
  • This paper explores how motivating an incumbent CEO to undertake actions that improve the effectiveness of his management interacts with the firm's policy on CEO replacement. Such policy depends on the presence and the size of severance pay in the CEO's compensation package and on the CEO's influence on the board of directors regarding his own replacement (i.e., entrenchment). We explain when and why the combination of some degree of entrenchment and a sizeable severance package is desirable… CONTINUE READING
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