Analysis of information sources in references of the Wikipedia article "Outrage constraint" in English language version.
When the potential outrage costs are large enough, they will deter the adoption of arrangements that managers would otherwise favor. We shall refer to arrangements that are deterred in this way as ones that violate the 'outrage constraint.'
Bebchuk and Fried (2004) provide a substantial amount of evidence that the principal‐agent setting cannot explain the salient facts about CEO pay. They propose an alternative model in which CEOs have control over boards of directors and are mainly restricted by an "outrage constraint" where shareholders retaliate if they perceive executive compensation to be excessive.
In practice, modern C.E.O.'s set their own compensation, limited only by the outrage constraint -- outrage not on the part of the board, whose members depend on the C.E.O.'s good will for many of their perks, but on the part of outside groups that can make trouble.
The managerial power thesis of Professors Lucian Bebchuk and Jesse Fried argues that outrage is perhaps the only effective constraint on executive remuneration, where the board of directors is effectively dominated by a sufficiently powerful CEO or senior management group.
{{cite journal}}: Cite journal requires |journal= (help)Bebchuk and Fried (2004) provide a substantial amount of evidence that the principal‐agent setting cannot explain the salient facts about CEO pay. They propose an alternative model in which CEOs have control over boards of directors and are mainly restricted by an "outrage constraint" where shareholders retaliate if they perceive executive compensation to be excessive.