Verlustpartizipation von Vorständen

This paper examines the loss participation of executives following the German law of adequacy of executive directors’ compensation (VorstAG). First I provide an overview and discussion of the relevant law’ contents. To examine the potential economic impact of the loss participation, a modified tournament model is introduced. The model implies that the aspired participation succeds only partially. Hence, the law might probably fail in it’s purpose of lowering executive directors’ compensation.