Shame Sanctions and Excessive CEO Pay

Sandeep Gopalan

The debate over excessive CEO compensation has roiled scholars, corporations, and the government for a considerable time. This article suggests that there is an alternate way of attacking the problem of excessive executive pay-one that sidesteps the law and instead appeals to executives’ emotions. Shame sanctions offer a nonlegal route to curbing exorbitant CEO compensation. This article argues that increased disclosure of executives’compensation agreements will trigger emotions like shame, guilt and embarrassment in executives and directors. This in turn has the potential to influence financial behavior and motivate these actors to heed the concerns of the public and shareholders vis-a-vis executive pay.