David I. Walker

Document Type



A consensus is developing that executive compensation in the United States is inadequately linked to long-term company performance, resulting in reckless, short-term decision making. Congress, the Obama administration, and academic commentators have recently embraced dramatic restrictions on the form and holding period of senior executive pay, at least for some companies. A common view is that although regulation of the amount of executive pay would do more harm than good, regulation of form and term is desirable. This Article questions that view. It highlights the challenges of fruitfully regulating the form and term of pay arising from the complexity and diversity of executive pay arrangements, uncertainty as to the underlying reasons and hence appropriate remedies for short-termism, and the conflict between deterring reckless short-term behavior and encouraging sufficient risk-taking to maximize share value over the long term. It analyzes and critiques existing regulatory proposals, and, although not endorsing a regulatory solution, offers two ideas that policy makers should consider if faced with crafting a regulatory response to short-termism: first, focusing regulation solely on the term of pay, leaving form to company discretion, and second, adopting a comprehensive disclosure-based response.