Executive Compensation and the Horizon Problem: A Synthesis of the Economics of Age and Decision Management

Article Abstract:

Keywords: Economics, Investment Horizon, Decision Management We present a new perspective and new evidence on the horizon problem. A synthesis of the economics of age and decision management implies that widely-held firms with long investment horizons are more likely to employ younger subordinate executives. Further, when a corporation has younger subordinate executives there is less of a need for stock-based compensation for the CEO. Our empirical results indicate that the stock-based compensation for CEOs is positively related to both firm horizon and CEO age. Significantly, we find that while controlling for CEO age, CEO stock-based compensation is positively related to average subordinate age. This observation is consistent with our hypothesis that younger subordinates, with their longer horizons, can influence and discipline the long-range decision-making of an older CEO.

United States, Finance

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Resource allocation, investment decision and economic welfare: capitalism, socialism and Islam

Article Abstract:

Resource allocation is examined in the context of an interest-free Islamic economy. The conditions necessary for such a system to flourish are also investigated while the implications of interest-free conditions on welfare economics and investment decision-making are analyzed. A critical review of resource allocation issues leads to the conclusion that efficient allocation is possible in an interest-free environment, provided that Islamic welfare criteria are followed and non-neoclassical models are used to shape the tenets of which Islamic economic policies are built.

Analysis, Economic aspects, Investments, Socialism, Welfare, Public assistance, Capitalism, Resource allocation, Islamic economics

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