Baylor University Roundtable on the Corporate Mission, CEO Pay, and Improving the Dialogue with Investors

Abstract

A small group of academics and practitioners discusses four major controversies in the theory and practice of corporate finance:

• What is the social purpose of the public corporation? Should corporate managements aim to maximize the profitability and value of their companies, or should they instead try to balance the interests of their shareholders against those of “stakeholder” groups, such as employees, customers, and local communities?

• Should corporate executives consider ending the common practice of earnings guidance? Are there other ways of shifting the focus of the public dialogue between management and investors away from near-term earnings and toward longer-run corporate strategies, policies, and goals? And can companies influence the kinds of investors who buy their shares?

• Are U.S. CEOs overpaid? What role have equity ownership and financial incentives played in the past performance of U.S. companies? And are there ways of improving the design of U.S. executive pay?

• Can the principles of corporate governance and financial management at the core of the private equity model - notably, equity incentives, high leverage, and active participation by large investors - be used to increase the values of U.S. public companies?