When more is not enough: Executive greed and its influence on shareholder wealth. (2014)

“new research examines the effects of greed on shareholder wealth and looks at whether various contextual factors, like a strong board of directors, CEO tenure and discretion make the situation better or worse.

Haynes, K. T., asst Prof. University of Delaware; Campbell, J. T., University of Arkansas; & Hitt, M. A. Texas A&M University
Journal of Management, 0149206314535444.

Corporate greed needn’t be feared because it can be moderated, sums up Andrea Boyle Tippett in her review of this paper.

Haynes et al “examined the effects of greed on shareholder wealth and looked at whether various contextual factors, like a strong board of directors, CEO tenure and discretion make the situation better or worse.

“Their findings? Although the pursuit of extreme wealth by top managers can lead to lower performance and loss of shareholder value, a powerful board or long CEO tenure can moderate the relationship between greed and shareholder return.”

The researchers tested their hypotheses on a sample of over 300 publicly traded firms from multiple industries, examining stock market returns and dividends and conducting interviews.

“They also examined CEO cash compensation to that of the next most highly paid executive in the firm, as well as CEO “overpayment,” or the portion of the CEO’s total pay that exceeds what could be explained by factors like a firm size, prior performance and firm risk,” comments Tippet.

As predicted, greed was found to have a negative relationship with shareholder return, but this relationship was moderated by the presence of a powerful, independent board, the approach of individual CEOs and the discretion they were given to make decision, and CEO tenure.

Access the full paper here: When more is not enough 

Access Tippet’s review here: Greedy CEOs bad for business