Entries by Alex Edmans

Long-Term Executive Incentives Improve Innovation and Corporate Responsibility

Executive compensation is fixed and needs reform. But, most of the calls for reform focus on the wrong dimensions. They focus on the level of pay, or the ratio of executive pay to median worker pay – even though the evidence suggests that low ratios are linked to lower future performance. As I have argued in the Wall Street […]

Why the MSCI Study Does NOT Show That Equity Incentives Backfire

MSCI have released an impactful study entitled “Are CEOs Paid for Performance? Evaluating the Effectiveness of Equity Incentives”, purporting to show that equity incentives lead to poor long-term performance. In simple language, they just don’t work. This study has been highly influential and seized upon by the Wall Street Journal, CNN, and Fortune as “smoking gun” evidence that […]

Translating the New USS Pension Rules Into Plain English

Andy Haldane, the Chief Economist of the Bank of England, said that pensions are so complex that even someone “moderately financially literate” like he can’t understand them. This complexity certainly applies to pension tax rules when combined with changes to the Universities Superannuation Scheme (for employees of UK universities): despite being a finance professor, it’s taken […]

Eight Common Myths About CEO Pay

Few business topics capture the public’s interest – and ire – as CEO pay. Indeed, a major reason why executives carried little weight in the Brexit referendum was the belief that they are overpaid crooks. But, does perception actually match reality? The public’s view is largely shaped by what the media reports. And, the media […]

Brexit

The Case for Brexit The Case for Remain The Rational Response to Brexit. We’ve voted for Brexit; what should we do about it? Two Ideas for Making Brexit a Success. CityAM  

The Rational Response to Brexit

The Brexit vote was disappointing, for the reasons I wrote about in my earlier post. But, what’s done can’t be changed. What’s the best way to respond to it? It’s hugely tempting to accuse the Brexiteers of being racist or stupid. We share with glee how some admit that they were conned by Farage and […]

The Case for Remain

Today is perhaps the biggest decision the UK will ever face. Under 18s will be most affected by this decision but can’t vote. Brits can. More important than which way we vote is that we should vote. I’m normally politically apathetic (only voted once) but this is such a key decision, I’ve spent hours researching the […]

Size Matters, If You Control Your Junk

The first stock market trading strategy ever discovered was the size anomaly. Banz (1981) found that small stocks outperform large stocks, even after taking into account their higher risk. This finding has had profound implications, such as the creation of small stock indices (since the returns of small stocks shouldn’t be compared to large stocks) and the […]

The Case for Brexit

I’m strongly in favour of the UK remaining part of the EU. However, I recently went to a talk given by a Brexit supporter, to hear the other side. I believe that he/she gave some persuasive arguments. Even though I don’t agree with all of them, I thought to share them here, since it is important for […]