Illusory Stock Ownership Policies
Abstract: In the aftermath of the 2007-2008 financial crisis, many firms responded to a widespread pressure to curb excessive risk taking by adopting Stock Ownership Policies (“SOPs”) that require top executives and directors to hold a certain value of their companies shares. Firms commonly cite these policies as a key element in their mitigation of risk and alignment of interests between managers and shareholders. However, by analyzing the 2010 SOPs as applied to S&P 500 CEOs, I suggest that despite the prominent objectives that firms declare for their SOPs, these policies hardly work. This striking fact is camouflaged in firms’ proxy statements. Therefore, I put forward a proposal to make SOPs transparent.
