Shareholder-CEO relationships aren’t always based on good faith, where shareholders simply trust a CEO will fulfill their fiduciary duties to the best of their ability. Instead, corporate boards often deploy pay-for-performance models, withholding part of a CEO's compensation to bridge the gap between shareholders and the C-suite.
“One reason we see pay-for-performance models favored is they are generally viewed more favorably by the shareholders, to the extent that the achievement of financial performance is linked to value creation for the shareholders,” says Noah Kaplan, a managing director at corporate strategy advisors FW Cook.
