The Firm Divided blends the narrative of events involving particular firms and individuals with the insights of that academic research to present a coherent framework that ties the various strands of corporate governance-good and bad-together.

• Contents


• Preface v


• I Monitor 1


• 1 A gadfly in the ointment


• The consequences of separating ownership and control 3


• 2 Whose side are you on?


• The role of the board of directors 23


• 3 Overseeing the unseeable


• The conflict between managers and shareholders 47


• II Motivate 69


• 4 Narrowing the gap


• The incentives generated by managerial ownership 71


• 5 A primer on pay


• Executive compensation and efficient contracting 97


• 6 Hiding high pay


• Executive compensation and managerial power 135


• 7 Separating the wheat from the chaff


• Incentives generated by executives' career concerns 169


• IIIDelegate 205


• 8 With one hand tied behind their back


• Delegating monitoring to external capital markets 207


• 9 No skin in the game


• Delegating monitoring to financial analysts 239


• 10 Crashing the party


• Delegating monitoring to large shareholders 275


• IVSell 309


• 11 A new broom


• The market for corporate control 311


• 12 Bypassing the board


• Offensive tactics in hostile takeovers 341


• 13 Fighting back


• Defensive tactics in hostile takeovers 377


• V The rules of the game matter as well 413


• 14 Caught in the middle


• Reforming the legal and regulatory environment 415


• Epilog 431


• Acknowledgments 433


• Notes 435


• Bibliography 509

Graeme Guthrie is a professor in the School of Economics and Finance at Victoria University of Wellington, New Zealand. His research has appeared in the top journals on finance and economics, and as a consultant he has provided advice on a wide variety of issues in relation to agriculture, electricity, gas, real estate, and telecommunications, much of it using real options analysis. He is the author of Real Options in Theory and Practice (Oxford University Press).