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The Sarbanes Oxley Act of 2002: Implications for Compensation Structure and Risk-Taking Incentives of CEOs

The Sarbanes Oxley Act of 2002: Implications for Compensation Structure and Risk-Taking Incentives of CEOs

Cohen, Daniel A., Dey, Aiyesha and Lys, Thomas, "The Sarbanes Oxley Act of 2002: Implications for Compensation Structure and Risk-Taking Incentives of CEOs" (July 8, 2005).

Abstract:

    This paper investigates the effect of the Sarbanes-Oxley Act (hereafter, SOX) on the compensation structure and the risk-taking incentives of CEOs as revealed by their research and development expenses and capital expenditures. We hypothesize that firms will respond to the additional liability imposed by SOX on corporate executives by altering the mix of incentive compensation to fixed salary awarded to them in order to provide insurance. Consistent with this claim, we find that there was a significant decline in the ratio of incentive compensation to salary after the passage of SOX. We also hypothesize and find that there was a significant decline in research and development expenses and capital expenditures made by CEOs after the passage of SOX. This result is obtained after controlling for the effects of the economic environment and changes in compensation structure on CEOs' action choices. We interpret the above as evidence of some of the potential costs of this new regulation.
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Facts on voip

  • A major development starting in 2004 has been the introduction of mass-market VoIP services over broadband Internet access services, in which subscribers make and receive calls as they would over the PSTN. Another challenge for these services is the proper handling of outgoing calls from fax machines, TiVo/ReplayTV boxes, satellite television receivers, alarm systems, conventional modems or FAXmodems, and other similar devices that depend on access to a voice-grade telephone line for some or all of their functionality.
  • One must note that the maximum upstream in your Internet connection is the final throttle and service is not as good as standard telco services.
  • Some broadband connections may have less than desirable reliability. Where IP packets are lost or delayed at any point in the network between VoIP users, there will be a momentary drop-out of voice. This is more noticeable in highly congested networks and/or where there is long distances and/or interworking between end points.

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