Seven more 'myths' about money

Hot on the heels of their attempt to debunk some widely held views on corporate governance, the combination of David Larcker and Brian Tayan have expanded their efforts to take hot air out of the corporate governance debate. Expanding the third and most contentious of the "Seven Myths of Corporate Governance", the two Stanford University scholars have come up with a more provocative set of assertions. They further charge both scholars and a lot of people in the corporate governance industry of getting the wrong end of the stick about the role of carrots in corporate governance. These false notions include that:

1. The ratio of CEO-to-average-worker pay is a useful statistic
   
2. Compensation consultants cause pay to be too high
   
3. It is easy to tell whether a compensation package encourages “excessive” risk taking
   
4. Performance metrics and targets tie directly to the corporate strategy
   
5. Discretionary bonuses should be eliminated
   
6. Proxy advisory firms know how to evaluation compensation contracts
   
7. The numbers in the financial statements for executive options accurately capture their cost and value

This piece has the same good intentions as their previous one – exploding the folklore that has developed in a field where evidence is both ambiguous and hard to come by. They use the forum of the Rock Center's working paper series to explain: "Problems of excessive compensation and poorly structured contracts will not be remedied by artificial changes and congressional mandates. Why don't experts rely on the research to arrive at informed and fact-based solutions?" And that's sounds a bit like a plea for corporate-sponsored funding for a research programme.

Source document: The polemic "Seven Myths of Executive Compensation," by David Larcker and Brian Tayan of Stanford University, is a nine-page pdf file.