Disney

Executive pay is sometimes appropriate, often not.In a perfect business world, corporate governance and decision-making would follow sound and rational processes. And, indeed, Professor Todd Milbourn has discovered that, at times, executives are compensated appropriately and appropriate decisions are taken. This finding is from what he calls the “bright side” of his research. But, the real world can also serve up Disneys, Enrons, and WorldComs. Not all mismanagement, however, makes the front pages or drives companies into bankruptcy. More commonly it goes on unnoticed or as accepted practice, says Milbourn, associate professor of finance at the Olin School of Business at Washington University in St. Louis. His collaborative research also reveals a “dark side,” where companies reward chief executive officers simply for being lucky and where “yes men” often rule.