John Core - Faculty Research in Knowledge@Wharton

Executive Compensation: More Regulation, or Just More Transparency?

Wed, 17 Feb 2010 17:36:07 EST

The question of whether CEOs of America's major companies are overpaid has been a subject of interest for many years. Are the compensation practices for these elite men and women fair and appropriate? Do they provide proper incentives, or do they reward excessive caution or risk taking? Wharton accounting professors John Core and Wayne Guay have just completed a study on this topic. Guay, along with colleague Chris Armstrong, sat down with Knowledge@Wharton to discuss executive compensation and the controversies that it continues to generate.

Not a Dirty Word: How Companies Use Debt to Improve Their Bottom Line

Wed, 04 Feb 2009 17:07:39 EST

To many laymen, debt is a dirty word, and plenty of companies have indeed been dragged under by shouldering too much. But academics and other experts have long believed the opposite is true: Many companies take on too little debt, failing to fully exploit benefits like the tax deductions on interest payments. Now, new research by three Wharton faculty members -- Wayne R. Guay, Jennifer Blouin and John E. Core -- shows that companies are not, in fact, foolishly leaving tax deductions on the table.

What Happens When the Press Blasts Your CEO for Excess Compensation? Apparently Not Much

Wed, 22 Mar 2006 15:54:43 EST

Springtime, in addition to bringing back flowers and birds, also brings forth many companies' proxy statements, including information on CEO compensation. It's a signal for the business press to get to work reporting the details of what appear to be the highest executive pay packages. Wharton accounting professors Wayne Guay and John Core, and Stanford accounting professor David Larcker, also study executive compensation. What they conclude from their most recent research is that the most relevant information doesn't necessarily make headlines. They also find that in general, the media's focus on excessive compensation does not substantively change corporate behavior with regards to pay packages.

SEC's Spotlight on Executive Pay: Will It Make a Difference?

Wed, 08 Feb 2006 16:48:07 EST

Compensation for American CEOs has soared over the past decade, far exceeding inflation and wage gains of ordinary workers -- and leading critics to charge that self-serving insiders have tilted the playing field at shareholders' expense. In response, the Securities and Exchange Commission on January 17 took the first step toward adopting rules to better show shareholders how much their top executives and directors are paid. Will that drive executive pay down? Probably not, say several Wharton professors, arguing that executive pay is not necessarily as excessive as the most extreme cases suggest. Still, they agree that more complete disclosure would improve the system. As one expert puts it: "When people are forced to undress in public, they pay attention to their figures."

Splitting Up the Roles of CEO and Chairman: Reform or Red Herring?

Wed, 02 Jun 2004 12:53:06 EST

There may be good reasons, based on specific circumstances, for companies to divide the roles of CEO and chairperson between two people. But Wharton faculty members say there is no evidence that separating these positions, as a general philosophical rule, improves corporate performance. And indeed, while figures show that many companies are dividing the jobs of CEO and chairperson, the trend is not widespread. Yet Wharton faculty also note the benefits of separating the two positions, especially in companies that are plagued by scandal or struggling to compete.

How Employee Stock Options Can Influence the Value of Ordinary Shares

Wed, 17 Dec 2003 14:49:23 EST

Tallying corporate profits has never been easy, but in the past few years it’s become even harder as the debate continues over how to count employee stock options. Most of the discussion is over whether options should be counted as an expense. But also important, says Wharton accounting professor Wayne R. Guay, is what effect options have on the number of stock shares a company has in circulation. The answer can make a big difference when a company computes its earnings per share, and when investors calculate the price-to-earnings ratio. Guay and colleagues John E. Core and S.P. Kothari examine the issue in a paper entitled, “The Economic Dilution of Employee Stock Options: Diluted EPS for Valuation and Financial Reporting.”

Stock Options: The End of the Affair?

Wed, 30 Jul 2003 00:00:00 EST

It was front-page news when Microsoft announced early in July that it was shutting down its options program and planning instead to award employees shares of stock. To many corporations, especially technology firms, the move smacked of heresy. Options, they say, are the best way to motivate employees and a low-cost way to lure top talent. Critics, however, believe options fueled the corporate scandals of the past few years and argue that they actually undermine corporate performance. While neither side seems to be backing off, observers suggest that widely-expected changes in accounting rules may be what finally decides the issue.

Are Stock Options In Your Future?

Wed, 29 Jan 2003 00:00:00 EST

Given the recent turmoil surrounding stock options, employers and employees alike may be looking more skeptically at this once-popular form of compensation. Among the issues to be considered: How effective are stock options in aligning the interests of managers with the interests of shareholders? Do broad-based option programs improve company performance? And should companies be required to include stock option compensation as an expense on their income statements?

New Ways to Retain and Reward Employees (Hint: We�re Not Talking Stock Options)

Wed, 09 Oct 2002 00:00:00 EST

In the wake of media reports about abuse of stock options, some technology firms are rethinking the incentives they use to compensate valuable employees. Meanwhile the debate over whether to expense stock options continues even as a Merrill Lynch study confirms what many tech firms have claimed � that they will take a bigger hit on earnings if options are expensed than will other non-tech businesses.

Will Expensing Stock Options Create New Problems?

Wed, 31 Jul 2002 00:00:00 EST

In the wake of a series of high-profile alleged accounting abuses, stock options have gained a bad name. Top executives are under fire for mismanaging earnings � pumping up profits so they can cash in stock options that enrich them personally at the expense of their company's health. But even as politicians and the media vilify stock options, experts from Wharton and elsewhere are asking if the blame is being misdirected, and if the solutions being adopted might bring about new problems.

Re-examining Stock Options as a Way to Compensate Executives

Wed, 13 Mar 2002 00:00:00 EST

Now that an underperforming stock market and the excesses of Enron have focused new attention on the use and abuse of stock options as a way to incentivize senior managers, what changes, if any, should companies make in their design of compensation packages? The answer depends on each company�s philosophy and goals, but Wharton faculty and others suggest guidelines to help define the appropriate combination of executive incentives.

CEOs and Their Companies Profit from Executive Stock Ownership

Thu, 20 Jan 2000 16:53:56 EST

Should CEOs be required to own stock in their own companies? Does such equity ownership affect financing and investment decisions that ultimately increase shareholder value? Wharton professors John E. Core and David F. Larcker studied 195 firms that adopted target ownership plans involving senior-level managers between the years 1992 and 1996. Their goal: To determine whether such plans have a direct impact on a firm�s operating and stock market performance. The researchers� conclusion: While target ownership plans aren�t a magic bullet, when CEOs with below-average stock ownership in their companies increase their holdings, company performance definitely improves.