Page data
Type Literature review
Authors Cleyton M. Cavallaro
Published 2016
License CC-BY-SA-4.0
Impact Number of views to this page. Views by admins and bots are not counted. Multiple views during the same session are counted as one. 713


Note to Readers[edit | edit source]

Please leave any comments on the Discussion page (see tab above) including additional resources/papers/links etc. Papers can be added to relevant sections if done in chronological order with all citation information and short synopsis or abstract. Thank You.

Background[edit | edit source]

Searches

  • Google Scholar
  • CEO Utility Pay
  • CEO Compensation Electric Utility
  • CEO Electric Utility
  • Executive Utility Compensation
  • CEO Salary Utility
  • Electric Utility Compensation

Journals

  • Academic OneFile
  • CEO Utility Pay
  • Journal of Financial Economics
  • Electric Utility CEO

Utility CEO Pay[edit | edit source]

From Wikipedia: Electric Utility "The compensation received by the executive in utility companies often receives the most scrutiny in the review of operating expenses. Just as regulated utilities and their governing bodies struggle to maintain a balance between keeping consumer costs reasonable and being profitable enough to attract investors, they must also compete with private companies for talented executives and then be able to retain those executives."

see Executive Compensation in the U.S. for a summary on why private companies seem to have an advantage in terms of CEO pay.

Why CEO Utility Pay?[edit | edit source]

CEO, or Chief Executive Officer, salary has risen dramatically over the past two decades. Utility companies are found to pay their CEO's significantly less than their private counterparts. This is being investigated to determine the chief reasons CEO's in the electrical utility industry seem to be paid less, and discover if their pay is justified.

Factors of CEO Pay[edit | edit source]

There are several generally agreed upon components to a CEO's salary:

  • Base Salary
  • Incentive Pay, Short Term (i.e., bonus)
  • Incentive Pay, Long Term (i.e., stocks)
  • Benefits (i.e., Cars, Health Care, Retirement)

Running Notes and Ideas[edit | edit source]

This is a collection of ideas I develop while conducting the literature review. Comments and edits, as well as new ideas are appreciated here.

Starting Notes

Continuing Notes

  • Why do CEOs in utilities make less? should they be making more?
  • Gather data on many firms from both electric utilities and non-regulated industries.
  • Use this data (firm size, stock price, etc.) in minitab to discover what variable are more significant in calculating the pay of a CEO for both industries.
  • use minitab to see if utility industries pay more with salary/bonus or stock options than non-regulated firms.
  • Research how compensation contracts are designed
  • compare CEO compensation before the major deregulation and post deregulation, economy growth, etc. See if the compensation has increased in a way that reflects the amount it should have increased with deregulation and economic growth.
  • compare how solar effects CEO pay
  • Based on other paper I know what factors affect CEO pay. I can compare current utility company conditions to past conditions and to non-utility conditions. If utility companies have grown closer to non-utility companies recently, the CEOs should be paid closer to the industry standard. if the opposite, they should be paid less or equal.
  • can compare companies with a high amount of solar, and if that increases CEO pay.

Literature Review of CEO Utility Pay[edit | edit source]

Electric Utility Compensation[edit | edit source]

Executive Compensation and Corporate Performance in Electric and Gas Utilities[edit | edit source]

A. Agrawal, A. K. Makhija, and G. N. Mandelker, "Executive Compensation and Corporate Performance in Electric and Gas Utilities," Financial Management, vol. 20, no. 4, p. 113, Winter 1991.

  • Measurement of profitability:
  1. accounting data
  2. stock market returns
  • Managers should be rewarded for ability, responsibility, firm size, past performace, current performance
  • Need to focus on whole compensation package (bonus, stocks, salary, etc.)
  • Most studies look at historical data. How do I predict future data?
  • 2 views on what CEOs strive for:
  1. maximize sales in order to grow their own job security, perks, prestige, and control
  2. market forces and compensation contract align the CEO with stockholder interests. i.e., maximize stockholder wealth
  • Used all utility firms with the SIC codes 4911 and 4931 on the COMPUSTAT tapes which were listed on the New York Stock Exchange or the American Stock Exchange in 1985
  • Proxy statements were requested directly from these firms for the period of 1975-1984.
  • size was measured by: sales, number of employees, shares outstanding, market value of equity, or total book value of assets
  • Consumer Price Index was used to convert dollar values across time
  • Stock options were ignored because they were so rarely used in compensation
  • pension benefits were ignored because of the difficulty of estimating their value and contribution
  • Demand for the public utility's product is mostly determined by economic and weather conditions in the area.
  • public utility's price is set by the public utility commission
  • Concluded that compensation for managers shifted their goals to line up with the stockholders'
  • This contradicts the most common view, that utility managers do not have incentive to increase stockholders wealth

Executive Compensation Contract Adoption in the Electric Utility Industry[edit | edit source]

W. N. Lanen and D. F. Larcker, "Executive Compensation Contract Adoption in the Electric Utility Industry," Journal of Accounting Research, vol. 30, no. 1, pp. 70–93, 1992.

  • Hypothesis: Changes in executive compensation contracts are an organizational response to shifts in the firm's external environment and/or corporate strategy
  • Results provide "modest" evidence that the adoption of compensation contracts into pay structure of electric utilities is related to changes in incentive regulation and production efficiency
  • No relation between adoption of new contracts and firm diversification
  • no relation between cash compensation (salary+bonus) and electric performance and production efficiency.
  • Utilities that see increases in incentive regulation and with low production efficiency will adopt compensation contracts
  • results have only modest level of statistical significance
  • see note one for more sources on the history of the industry
  • 2 regulatory types:
  • passes the cost of inefficiency to customer (i.e., sets prices at above what the firm's costs are currently)
  • makes shareholder wealth a direct function of inefficiency (i.e., promotes innovation and efficiency)

Regulatory Constraints on CEO Compensation[edit | edit source]

P. Joskow, N. Rose, A. Shepard, J. R. Meyer, and S. Peltzman, "Regulatory Constraints on CEO Compensation," Brookings Papers on Economic Activity. Microeconomics, vol. 1993, no. 1, pp. 1–72, 1993.

  • Looks at many industries, but has lots of data on electric utilties
  • Sample of 2,000 CEOs from 1970 to 1990
  • CEOs of regulated firms earn less than those in unregulated firms
  • CEOs of electric utilities earn 30-50 percent of the compensation of CEOs in unregulated industries, with all other factors being the same
  • CEOs in electric utilities earn 40-50 percent of normal CEOs for Salary and Bonus
  • CEOs in electric utilities earn 30-40 percent of normal CEOs for long term incentives (stock options)
  • When regulation was the tightest, CEOs earned the least
  • CEO compensation is less dependent on company profits during regulation
  • for electric utilities, regulation is on a firm by firm basis, i.e. each firm has individual rates set for it.
  • Electric utilities tend to stay in single states and are regulated at the local level
  • Data collected from Forbes, COMPUSTAT, and the Center for Research on Security Prices
  • relative CEO compensation decreases after the mid 1970s and recovers only slowly into the late 1980s
  • CEOs in electric utilities make the least of any of the examined industries
  • firms that have holding companies has CEOs with a 12% increase in salary
  • firms that have holding companies has CEOs with a 9% increase in compensation
  • firms that have diversification have CEOs with a 15% increase in salary
  • firms that have diversification have CEOs with a 30% increase in compensation
  • firms that have both holding companies and diversification have CEOs with a 25% increase in compensation
  • firms that have both holding companies and diversification have CEOs with a 40% increase in compensation
  • cant tell if the results are from excessive pay in unregulated firms or low pay in regulated firms

Political Constraints on Executive Compensation: Evidence from the Electric Utility Industry[edit | edit source]

P. L. Joskow, N. L. Rose, and C. D. Wolfram, "Political Constraints on Executive Compensation: Evidence from the Electric Utility Industry," The RAND Journal of Economics, vol. 27, no. 1, pp. 165–182, 1996.

  • covers 1978-1990
  • 2 extreme views help highlight the array of views on the topic:
  1. CEO compensation is not sensitive enough to firm financial performance
  2. executive compensation is generally controlled by the CEO rather than the board of directors, giving CEOs a higher salary
  • 2 ways political constraints can affect pay:
  1. It can make a CEO's job easier, making it more profitable to reduce the CEOs pa, tie pay less to firm performance, etc.
  2. The board may react to the high CEO pay currently observed and try to reduce the costs.
  • Salomon Brothers regulatory environment rankings were used.

Variables

  • CEO Compensation:
  • annual salary and bonus (Forbes' annual survey of CEO compensation and proxy statements)
  • salary and bonus captures almost all of a CEOs pay in the industry (95%)
  • CEO characteristics(Forbes' survey or proxy statements):
  1. age
  2. tenure in office
  3. if the CEO was hired from outside the company or promoted
  • Firms Characteristics:
  1. Firm size(revenue, assets, employees used to measure from COMPUSTAT Utility Tapes)
  2. Financial performance(COMPUSTAT Tapes, stock market rates of return)
  3. measures of organizational structure(utility annual reports, 10k filings, financial analysts' reports. if it is organized as an exempt holding company and if it has diversification into non regulated industries.)
  • Regulatory and Political Environment:
  1. Salomon Brothers' Rankings
  2. residential and industrial rate change
  3. characteristics of each states regulatory agency(annual issues of the National Association of Regulatory Utility Commissioners' annual report on utility and carrier regulation, 1978-1990.
  • CEO compensation results:
  • paid less when their firms regulatory environment favors consumers
  • Paid less when rates are high or rising rapidly (mostly residential)
  • paid less when their state has an elected commissioner

CEO Compensation in a Regulatory Environment: An Analysis of the Electric Utility Industry[edit | edit source]

S. Bryan and L. Hwang, "CEO Compensation in a Regulatory Environment: An Analysis of the Electric Utility Industry," Journal of Accounting, Auditing & Finance, vol. 12, no. 3, pp. 223–251, Jul. 1997.

  • possible source: joskow et al. 1993, 1996
  • ways regulation affects CEOs:
  • restrict decisions and actions of CEOs
  • reduce investment opportunity set
  • regulatory commissions reduce information asymmetry
  • political constraints on board of directors
  • Hypothesis are included throughout paper.
  • Information sources:
  • Rankings of a regulatory environment, Merrill Lynch
  • Holding company status, Moody's Public Utilities Manual
  • percentage of power generated from nuclear, Moody's Utilities Manual and Value Line Investment Survey
  • Incentive regulation, Landon 1993
  • Revenue requests and approvals, Public Utilities Fortnightly
  • Regulatory lag, Public Utilities Fortnightly
  • data from 1990-1995
  • Table 1 shows compensation component values by year
  • Results:
  • Incentive regulation has been around since the 1980s
  • longer regulatory lag means a higher likelihood of unfavorable regulatory climate
  • electric utilities with incentive regulation are more likely to have greater public scrutiny and political constraints
  • those with nuclear as a major power source are more likely to have incentive regulation and have a less favorable regulatory environment
  • utilities with incentive regulation have a greater regulatory lag (time between rate request & approval dates)
  • more regulatory lag gives greater scrutiny and political constraints
  • those with holding companies have a shorter regulatory lag, have a better regulatory climate, and have a smaller chance of being under incentive regulation.
  • Compensation(comp) and the proportion of incentive pay(incentive) Results:
  • Comp and incentive are higher for holding companies. Other factors do not change
  • Comp and incentive increase for nuclear plants. (riskier)
  • incentive regulation lowers comp and incentive
  • regulatory environment (favorable) increases comp and incentive
  • longer regulatory lag and more frequent rate requests lower incentive
  • Overall, compensation and incentive are higher for firms that have a less rigid regulatory environment.
  • Incentive increases with larger firms, firms with less assets, firms with more growth opportunities, firms with more risk

Ownership, Regulation, and Managerial Monitoring in the Electric Utility Industry[edit | edit source]

R. R. Geddes, "Ownership, Regulation, and Managerial Monitoring in the Electric Utility Industry," The Journal of Law & Economics, vol. 40, no. 1, pp. 261–287, 1997.

  • addresses/examines 3 issues:
  • sensitivity of manager turnover in investor owned utilities to changes in owner and customer wealth
  • government owned firms are included in the investigation of turnover & performance vs. manager turnover
  • estimates of manager turnover from The Journal of Political Economy were replicated
  • Under regulation, if a firm is marking at least the allowed rate of return, the CEO doesn't have to care about owner's interests, and inefficiency has no costs.
  • Data retrieved from: Statistics of Publicly Owned Electric Utilities in the United States and Statistics of privately Owned Electric Utilities in the United States over the years 1966-1988
  • turnover in all firms does not change with shareholder wealth (accounting terms)
  • turnover in investor-owned was insensitive to changes from the allowed rate of return and real allowed return
  • Turnover is related to changes in consumer welfare (prices)
  • Turnover is similar across all firms
  • turnover in government owned utilities is more sensitive to firm size than investor owned.
  • Appendix A, Table A1 lists all data sources

Strategic orientations, incentive plan adoptions, and firm performance: Evidence from electric utility firms[edit | edit source]

N. Rajagopalan, "Strategic orientations, incentive plan adoptions, and firm performance: Evidence from electric utility firms," Strategic Management Journal, vol. 18, no. 10, p. 761, 1997.

  • Relates everything to Miles and Snow (1978) Defender and Prospector firms
  • Not very useful, re-states what other studies have said, but makes it more confusing by adding defender vs. prospector firms.
  • Prospector Firms: Offer their top managers discretion.
  • Defender firms: Adopt and protect narrow and stable domains.
  • Hypothesis 1: Annual bonus plans will have a stronger positive effect on firm performance among defenders than among prospectors
  • supported for accounting measure of performance, not market measure
  • Hypothesis 2a: Long term performance plans which use accounting measures as performance criterea will have a stringer positive effect on firm performance among defenders than among prospectors
  • Not supported
  • Hypothesis 2b: Long term plans which use market-based measures as performance criterea will have a stronger positive effect on firm performance among prospectors than among defenders
  • Strong support
  • Hypothesis 2c: long term performace plans which offer cash incentives will have a stronger positive effect on firm performance among defenders than among prospectors
  • Not supported`
  • Hypothesis 2d: long term performance plans which offer stock incentive will have a stronger positive effect on firm performance among prospectors than among defenders
  • Strong support
  • Hypothesis 3: Stock option plans will have a stronger positive effect on firm performance among prospectors than among defenders
  • Strong support

Political Institutions and Electric Utility Investment: A Cross-Nation Analysis[edit | edit source]

M. Bergara, W. Henisz, and P. Spiller, "Political Institutions and Electric Utility Investment: A Cross-Nation Analysis | California Management Review," California Management Review, vol. 40, 1998.

  • This paper focuses on many nations. It analyzes the regulations of each country and more. This could be reproduced for various states in the US to map out the environments seen across the US for the industry.
  • In order to eliminate all the effects of various regulatory climates, I could focus on just MI. This might skew the results however because there would be no comparison
  • Electric utilities have very high politicization and sunk costs
  • 3 features of the industry:
  1. large, specific, sunk costs
  2. important economies of scale/scope (few suppliers)
  3. outputs are largely consumed (politicians will care about the level of pricing)
  • Levy and Spiller 1994 have a design used to analyze the interactions of the institutions, the regulations, and the performance of a country. This is used. Could this be adapted for U.S. States?
  • See appendix 1
  • political credibility (judicial effectiveness, formal constraints, informal constraints)
  • median tenure of justices was used as a measure of judicial independence
  • main results show in table 1
  • mostly applies to other countries. Useful if it can be changed to state relationships

Linking CEO pay to firm performance: empirical evidence from the electric utility industry[edit | edit source]

Augustine I. Duru and Raghavan J. Iyengar, "Linking CEO pay to firm performance: empirical evidence from the electric utility industry," Managerial Finance, vol. 25, no. 9, pp. 21–33, Sep. 1999.

  • Suggests CEO pay is structured in a way that rewards CEOs who can increase the utility rate to consumers.
  • In unregulated industry, traditional CEO skills could be required.
  • In electric utility, traditional skills might not be needed.(regulation can make these skills obsolete)
  • This paper trys to solve the disagreement on the relationship between firm performace and CEO compensation.
  • It uses Canonical correlation analysis (CCA). this helps to relate many variables at once.
  • increase in firm performance leads to increase in compensation
  • Increase in market returns leads to increase in bonus
  • Increase in sales growth(increase in rate to consumers) leads to increase in stock options
  • Compensation Components include:
  • Salary
  • Bonus
  • Long-term compensation
  • stock options
  • Performance Measures include:
  • Market returns
  • Return on assets
  • earnings per share
  • Operating cash flow per share
  • Growth in sales
  • In order to not need to know things like executive age, tenure, experience, ability, etc. changes in compensation were measured.
  • final results show that firm performance increase has "moderate predictive power" for compensation
  • Increase in market returns gives increase in short term compensation
  • market returns are a good way to measure firm performance
  • Did not separate the stages of production or the ownership of the firm in this study. This is important if calculation of the exact salary is needed.
  • This also only did a linear relationship between variables. It could fit better if a higher order was used.
  • almost 45% of the sample used included stock options. other studies have stated that stock is a minor part of the total compensation but here that appears false.

The impact of regulation on CEO labor markets[edit | edit source]

D. Palia, "The impact of regulation on CEO labor markets," RAND Journal of Economics, vol. 31, no. 1, p. 165, 2000.

  • Utilities attract CEOs with a lower quality education than unregulated industries do
  • Used educational background to measure manager quality. This isn't very good but it is the only reliable way
  • Mentions the utility industry is expecting deregulation
  • Utilities have more engineers and lawyers than MBAs.
  • after deregulation in the airline industry, the quality of CEOs went up and the number of CEOs with MBAs went up
  • Measured performance of firms with stock returns, not accounting numbers
  • Calculated value of stock options with Black and Scholes option validation model, assuming continuously paid dividends.
  • Most executive options have a ten-year maturity
  • random control group of manufacturing firms (SIC codes 2000-3999 from Standard and Poor's compustat)
  • schooling, tenure w/ firm, tenure w/ CEO, previous jobs, etc. are all found in MArquis's Who's Who in finance and industry, Dun and Bradstreet's Reference book of corporate managements, and the standard and poor's registar of corporations, directors, and executives.
  • all CEO compensation variables are obtained from the annual proxy statements filed by firms with the SEC.
  • Tobin Q values were calculated
  • Utilities tend to have larger capital expenditures
  • Utilities also have lower research and development expenses.
  • Utilities have a lower pay-performance sensitivity than unregulated firms.
  • This is mostly driven by options and share holdings
  • The paper describes specific numerical values of unregulated industries vs. regulated industries
  • Possible reasons CEO quality is lower during regulation:
  • returns to CEO quality are lower during regulation
  • The compensation of CEOs during regulation is restricted, so better CEOs go elsewhere

Chief Executive Officer Careers in Regulated Environments: Evidence from Electric and Gas Utilities[edit | edit source]

C. J. Hadlock, D. S. Lee, and R. Parrino, "Chief Executive Officer Careers in Regulated Environments: Evidence from Electric and Gas Utilities," The Journal of Law & Economics, vol. 45, no. 2, pp. 535–563, 2002.

  • Utility CEOs:
  • are older when appointed
  • graduated from less prestigious colleges
  • more likely to have legal background
  • do not stay in office any longer or shorter than other industries
  • less likely to be forced from office
  • less likely to be replaced by out of company CEO
  • regulatory expertise is favored in CEOs of utilities
  • pay-performance CEO pay in low in regulated industries
  • data from 1971-1995
  • has good summary of CEOs in regulatory environments

CEO Compensation after Deregulation: The Case of Electric Utilities[edit | edit source]

S. Bryan, L. Hwang, and S. Lilien, "CEO Compensation after Deregulation: The Case of Electric Utilities," The Journal of Business, vol. 78, no. 5, pp. 1709–1752, 2005.

  • In 1992 NEPA decreased regulation. This affected the CEO compensation by increasing firm competition
  • Assumes that managers behave in a way consistent with their compensation
  • FERC's Form 1 gives information on firms performance, and could be useful
  • A control sample of other non-regulated firms was used
  • CEO compensation becomes more performance based after regulation ended.
  • Firms have annual SEC proxy statements that summarize their CEO-compensation policies
  • deregulation requires more time from the CEO, which increases CEO compensation
  • Stock option compensation Variables include:
  1. Investment opportunity set (IOS)
  2. Agency cost of debt
  3. Liquidity Constraints
  4. Firm Size
  • SIC codes 4911 and 4931 has firms with data used in samples
  • Components of compensation
  1. Salary
  2. Annual cash bonus
  3. value of stock options
  4. value of restricted stock grants
  5. long-term incentive plan payments
  • Value of stocks was measured using Black-Scholes (1973) model.
  • data was received from the Compustat and the Center for Research in Security Prices (CRSP) databases.
  • Ways to estimate the relation between CEO compensation and earnings performance:
  1. firm specefic regressions
  2. Regression for pooled data set
  • Variables used in calculations:
  1. sample period
  2. Free cash flow
  3. long term debt
  4. investment opportunity set
  5. total assets (natural log)
  6. CEO stock ownership
  7. regulatory environment indicator
  8. earnings based measures of performance (2 total)
  9. variance of annual earnings
  10. variance of monthly stock returns
  • Variables used in calculations of CEO pay:
  1. salary
  2. Bonus
  3. stock option (black-scholes pricing)
  4. restricted stock compensation
  5. long term incentive plan layout
  6. ratio of CEO stock option compensation to cash compensation(salary+bonus)
  • benefits was purposefully left out.
  • This paper did not specify if firms were coal, solar, hydro, etc. This would help.
  • The paper gives a future research topic into the reasoning of why there is a reweighting of the parameters of bonus formulas that certain utilities undertook during worse performance.

Governance Structure Changes and Product Market Competition: Evidence from U.S. Electric Utility Deregulation[edit | edit source]

C. G. Rennie, "Governance Structure Changes and Product Market Competition: Evidence from U.S. Electric Utility Deregulation," The Journal of Business, vol. 79, no. 4, pp. 1989–2017, 2006.

  • Objectives:
  1. explain what changes occur following deregulation of electric utilities
  2. examine relationship between governance structure changes and product market competition
  • equal number of electric utilities and industrial firms examined. all firms were matched up on performance, size, age.
  • Data from 1987-1990 and 1994-1997
  • Post deregulation for electric utilities:
  • Growth opportunities increase
  • median CEO ownership increases post deregulation
  • mean proportion of CEO pay in option increases post deregulation
  • median proportion of outside directors increases
  • median industrial proportion of outside blockholder ownership increases
  • median proportion of CEO compensation in options increases
  • median board size drops (12 to 11)
  • utilities take governance structures that control owner-manager agency conflict better after deregulation
  • this change of structure does not quite reach the level of industrial firms
  • if the partial deregulation seen here were fully deregulated, the firms would reflect current deregulated industries.

Deregulation and environmental differentiation in the electric utility industry[edit | edit source]

M. Delmas, M. V. Russo, and M. J. Montes-Sancho, "Deregulation and environmental differentiation in the electric utility industry," Strat. Mgmt. J., vol. 28, no. 2, pp. 189–209, Feb. 2007.

  • How deregulation can impact firm strategies and environmental quality in electric utilities
  • After deregulation, it is found that firms "differentiate" themselves. ie. firms in areas with customers who want green power will promote the manufacture and sale of green power techniques. Firms with customers who want the cheapest energy will strive to lower costs
  • Regulation bottled all the different types of customers into one. After regulation, the firms branched out
  • Deregulation Laws passed:
  • Public Utility Regulatory Policies Act (PURPA) in 1978
  • Energy Policy Act of 1992
  • Individual states started deregulation: California first, then many more states including Michigan. (Table 1)
  • US Department of energy was used to generate statistics on sales of green power
  • Trying to calculate Change in % of generation from renewables from variables like Deregulation, Environmental Sensitivity, Percentage of generation from coal, efficiency
  • Used a pooled OLS estimation regression. Cook-Weisberg and White Test statistics

Incentive Design Varies by Industry: Spotlight on Electric Utilities[edit | edit source]

J. F. Reda, D. M. Schmidt, and K. A. Glass, "Incentive Design Varies by Industry: Spotlight on Electric Utilities," Journal of Compensation and Benefits, Dec. 2014.

  • Within the largest 200 public companies there are 16 electric utilities
  • Incentive compensation is a majority of CEO pay at public companies
  • because of rate payers, compensation of CEO pay in utilities is very complicated
  • Performance can be put into 3 categories:
  1. Market based
  2. Financial based
  3. operational
  • 4 things should be considered when considering compensation setting:
  1. peer group comparisons
  2. Pay positioning strategy
  3. Internal vs. External pay
  4. performance alignment with business plan.
  • Discussed many different measures of performance used in incentives for electric utilities.
  • shows that incentives are different in electric industry

Primary differences:

  1. short term incentives are more complex and more focused on operations
  2. will use more EPS and less revenue or cash flow as performance measures
  3. less likely to use stock options
  4. more likely to have performance based grants and time vested full value shares. performance is measured as a relative TSR
  5. more likely to use relative measure. use EPS over revenue and cash flow
  6. EPS and capital efficiency promote corporate performance.

FERC's 'Demand Response' Rule Upheld by U.S. Supreme Court[edit | edit source]

G. Stohr and J. Polson, "FERC's 'Demand Response' Rule Upheld by U.S. Supreme Court," Bloomberg Politics, 25-Jan-2016. Full Decision

  • The ruling promotes (industrial) customers to cut back on power consumption during peak usage times
  • It does this by providing subsidies.
  • The case was brought on because the government is supposed to leave retail price regulation to the state level (U.S. Federal Power Act), but this ruling affects the retail price in a roundabout way
  • This ruling is supposed to help the environment but hurt utilities.