How Better Corporate Governance Fosters Disruptive Innovation Through Executive Compensation

Innovation is the primary engine of growth in economies at the technological frontier, and a path to higher profits and growth for individual companies, as the likes of Apple, Alphabet, Microsoft, and Amazon make clear. CEOs play a crucial role in directing and overseeing their firms’ innovation efforts. This, however, creates a tension: The interests of the shareholders and the CEO might not be aligned, opening the door to agency frictions. In turn, such frictions can result in suboptimal investment in innovation, leading to losses in firm value for shareholders and low economic growth and welfare for the broader economy.… Read more