Summary, Analysis, Response Paper

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Summary, Analysis, and Response of “JOURNAL OF ACCOUNTING, AUDITING & FINANCE: Layoffs and chief executive officer (CEO) Compensation: Does CEO power influence the relationship?”

Joe Joseph
New York University

B.C. Henderson, A. Masli, V. J. Richardson, and J.M. Sanchez take a closer look at the relationship between layoffs and the compensation of the chief executive officer (CEO). Through quantitative research they discover that as the number of layoffs increase, CEOs’ bonus compensation decreases and their equity-based compensation increases (2010). Also in their research, they find that more powerful CEOs take smaller reductions in pay in comparison to smaller CEOs, even though the market performance of their firms is not superior (2010).

The Journal of Accounting, Auditing & Finance is edited by multiple professors at the Vincent C. Ross Institute of Accounting Research of New York University. It also consists of twenty-seven associate editors from various universities across America. Henderson, Masli, Richardson, and Sanchez have written the specific article, “Layoffs and chief executive officer (CEO) Compensation: Does CEO power influence the relationship?” The four authors are all members of the Department of Accounting at Mississippi State University and the University of Arkansas, respectively.

It doesn’t take long reading into the article to realize it was written for a well-educated, accounting/finance professional. Within the first few pages, Henderson et al. (2010) repeatedly refer to the “managerial power theory” without an explanation of what it is. Their assumption is that the reader has a wealth of financial knowledge. And if they don’t, they have no business reading this article. Even with four years of accounting and business education, I only have a vague idea of what the “managerial power theory” is.

The writing consists of short, to the point paragraphs littered with business jargon. For...
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