1. Possiblesolutions a. Enlightenedshareholder valueAs we could see in chapter 3 of this paper it would erroneous to statethat the legislators are completely unaware of the problems created by theshareholder primacy approach.
However, the provided so far responses show alack of either the ability or willingness to genuinely tackle the issue. Theintroduction of the enlightened shareholder value was followed by heavycriticism1. The interests that are supposed to enhance the quality of corporate governance –basically CA S172 – have been defined within the ideological framework ofshareholder primacy and only as secondary to it. Furthermore, thenon-exhaustive list includes interests that could easily collide and there isno guidance how to prioritise if such collusion happens. In the new Government response to the green paper consultation regardingcorporate governance reform2the British government maps out a plan for action which mainly focuses on increasingthe shareholder democracy and transparency within the reports. This can hardly bedescribed as anything else than a slight fine-tuning of the already existingsystem.
b. Performance-basedremunerationBebchuk and Fried presented performance-based remuneration as thedesirable way of allocating executive compensation and the managerial powerapproach as the way of separation the pays from the results. 3Although the shareholders` desire to align their interests with those of theiragents is understandable, today it seems unequivocal that performance-basedremuneration is one of the key reasons for short-terminism and excessiverisk-taking.
c. Shareholderdemocracy d. Distributivejustice e. Variable pay cap 2. ConclusionAs we could see in previous chapters both the academia and the currenthard and soft law regulations are trying to solve the problem of remunerationby introducing ideas behind quantification of executive compensation.
Withregard to this – although it is arguably on the verge of this paper`s scope – Iwould like to highlight the fact, that according to some research in modernbehavioural economics and psychology, money is not the only or even the bestmotivational tool. In their study4Ariely et al. show through a series of experiments that money is an effectivemotivational tool only when it comes to mechanical tasks, but fails when itcomes to creative tasks. They also argue that “ the results of theexperiments reported here suggest, at a minimum, that high payments cannot berelied upon to produce optimal behaviour.” 5Thus a potent question arises, whether money should be relied at all as theprimary tool for solving the problem of aligning the agent`s and principal`sinterests. 1 See (n 9) and (n 19). 2 See the full text here: https://www. gov. uk/government/uploads/system/uploads/attachment_data/file/640470/corporate-governance-reform-government-response. pdf3 Bebchuk and Fried (n 6) 72. 4 Dan Ariely, Uri Gneezy, George Loewenstein, and Nina Mazar – “ LargeStakes and Big Mistakes”, Review of Economic Studies (2009) 76, 451–4695 Ibid.