The Duty of Corporate Directors to Tie Executive Compensation to the Long-Term Sustainability of the Firm

Executive compensation is said to be for performance and, in liberal market economies, the board of directors along with compensation committees have largely been in charge of safeguarding pay for performance. This executive compensation system is legally protected by the business judgment rule (a strong judicial deference) and has recently been supplemented with shareholders’ ‘say on pay’. Further legal or government intervention has been deemed unnecessary. However, such system has resulted in extremely excessive executive compensation, outrageous pay disparities between executives and workers, poor or short-term performance, recurrent corporate failures and economic recession. This paper explores the need for a stronger legal intervention and argues that directors, in exercising their fiduciary duties, should be legally required to tie executive compensation to the long-term sustainability of the firm that in turn requires the use of executive pay to promote not only sustained growth and long-term shareholder value but also steady improvements in the interests of multiple stakeholders involved in the long-term success of the company, notably employees. It is further argued that, in liberal market economies, employees’ ‘say on pay’ should be considered as it is crucial to allow employees to communicate their interests in order both to incorporate them in the metric of long-term firm sustainability and to counter the likely opposition from short-term oriented shareholders and self-serving directors and officers. This proposal will contribute to avoiding excessive pay and short-termism and to promoting long-term firm performance, which will ultimately protect shareholders and employees’ interest in job security, fair and sustainable wages and secured pension while creating more stable economies and avoiding citizens subsidizing periodic corporate failures, excessive executive pay and the wealth accumulation plans of an elite shareholder class. The paper briefly analyzes whether directors have a duty to tie executive pay to long-term performance in the US and Canada and develops the argument building on the lessons that can be drawn from the 2009 German VorstAG (the Act on the Appropriateness of Management Board Remuneration) and the 2015 German Corporate Governance Code

Case Reports1. A Late Presentation of Loeys-Dietz Syndrome: Beware of TGFβ Receptor Mutations in Benign Joint Hypermobility

Background: Thoracic aortic aneurysms (TAA) and dissections are not uncommon causes of sudden death in young adults. Loeys-Dietz syndrome (LDS) is a rare, recently described, autosomal dominant, connective tissue disease characterized by aggressive arterial aneurysms, resulting from mutations in the transforming growth factor beta (TGFβ) receptor genes TGFBR1 and TGFBR2. Mean age at death is 26.1 years, most often due to aortic dissection. We report an unusually late presentation of LDS, diagnosed following elective surgery in a female with a long history of joint hypermobility. Methods: A 51-year-old Caucasian lady complained of chest pain and headache following a dural leak from spinal anaesthesia for an elective ankle arthroscopy. CT scan and echocardiography demonstrated a dilated aortic root and significant aortic regurgitation. MRA demonstrated aortic tortuosity, an infrarenal aortic aneurysm and aneurysms in the left renal and right internal mammary arteries. She underwent aortic root repair and aortic valve replacement. She had a background of long-standing joint pains secondary to hypermobility, easy bruising, unusual fracture susceptibility and mild bronchiectasis. She had one healthy child age 32, after which she suffered a uterine prolapse. Examination revealed mild Marfanoid features. Uvula, skin and ophthalmological examination was normal. Results: Fibrillin-1 testing for Marfan syndrome (MFS) was negative. Detection of a c.1270G > C (p.Gly424Arg) TGFBR2 mutation confirmed the diagnosis of LDS. Losartan was started for vascular protection. Conclusions: LDS is a severe inherited vasculopathy that usually presents in childhood. It is characterized by aortic root dilatation and ascending aneurysms. There is a higher risk of aortic dissection compared with MFS. Clinical features overlap with MFS and Ehlers Danlos syndrome Type IV, but differentiating dysmorphogenic features include ocular hypertelorism, bifid uvula and cleft palate. Echocardiography and MRA or CT scanning from head to pelvis is recommended to establish the extent of vascular involvement. Management involves early surgical intervention, including early valve-sparing aortic root replacement, genetic counselling and close monitoring in pregnancy. Despite being caused by loss of function mutations in either TGFβ receptor, paradoxical activation of TGFβ signalling is seen, suggesting that TGFβ antagonism may confer disease modifying effects similar to those observed in MFS. TGFβ antagonism can be achieved with angiotensin antagonists, such as Losartan, which is able to delay aortic aneurysm development in preclinical models and in patients with MFS. Our case emphasizes the importance of timely recognition of vasculopathy syndromes in patients with hypermobility and the need for early surgical intervention. It also highlights their heterogeneity and the potential for late presentation. Disclosures: The authors have declared no conflicts of interes

Sliding Mode Control of a Variable- Speed Wind Energy Conversion System Using a Squirrel Cage Induction Generator

This paper deals with the control of a variable-speed wind energy conversion (WEC) system using a squirrel cage induction generator (SCIG) connected to the grid through a back-to-back three phase (AC-DC-AC) power converter. The sliding mode control technique is used to control the WEC system. The objective of the controllers is to force the states of the system to track their desired states. One controller is used to regulate the generator speed and the flux so that maximum power is extracted from the wind. Another controller is used to control the grid side converter, which controls the DC bus voltage and the active and reactive powers injected into the grid. The performance of the controlled wind energy conversion system is verified through MATLAB simulations, which show that the controlled system performs well

Feedback Linearization Controller for a Wind Energy Power System

This paper deals with the control of a doubly-fed induction generator (DFIG)-based variable speed wind turbine power system. A system of eight ordinary differential equations is used to model the wind energy conversion system. The generator has a wound rotor type with back-to-back three-phase power converter bridges between its rotor and the grid; it is modeled using the direct-quadrature rotating reference frame with aligned stator flux. An input-state feedback linearization controller is proposed for the wind energy power system. The controller guarantees that the states of the system track the desired states. Simulation results are presented to validate the proposed control scheme. Moreover, further simulation results are shown to investigate the robustness of the proposed control scheme to changes in some of the parameters of the system

The Duty of Corporate Directors to Tie Executive Compensation to the Long-Term Sustainability of the Firm

Executive compensation is said to be for performance and, in liberal market economies, the board of directors along with compensation committees have largely been in charge of safeguarding pay for performance. This executive compensation system is legally protected by the business judgment rule (a strong judicial deference) and has recently been supplemented with shareholders’ ‘say on pay’. Further legal or government intervention has been deemed unnecessary. However, such system has resulted in extremely excessive executive compensation, outrageous pay disparities between executives and workers, poor or short-term performance, recurrent corporate failures and economic recession. This paper explores the need for a stronger legal intervention and argues that directors, in exercising their fiduciary duties, should be legally required to tie executive compensation to the long-term sustainability of the firm that in turn requires the use of executive pay to promote not only sustained growth and long-term shareholder value but also steady improvements in the interests of multiple stakeholders involved in the long-term success of the company, notably employees. It is further argued that, in liberal market economies, employees’ ‘say on pay’ should be considered as it is crucial to allow employees to communicate their interests in order both to incorporate them in the metric of long-term firm sustainability and to counter the likely opposition from short-term oriented shareholders and self-serving directors and officers. This proposal will contribute to avoiding excessive pay and short-termism and to promoting long-term firm performance, which will ultimately protect shareholders and employees’ interest in job security, fair and sustainable wages and secured pension while creating more stable economies and avoiding citizens subsidizing periodic corporate failures, excessive executive pay and the wealth accumulation plans of an elite shareholder class. The paper briefly analyzes whether directors have a duty to tie executive pay to long-term performance in the US and Canada and develops the argument building on the lessons that can be drawn from the 2009 German VorstAG (the Act on the Appropriateness of Management Board Remuneration) and the 2015 German Corporate Governance Code

Robust controllers for variable reluctance motors

This paper investigates the control problem of variable reluctance motors (VRMs). VRMs are highly nonlinear motors; a model that takes magnetic saturation into account is adopted in this work. Two robust control schemes are developed for the speed control of a variable reluctance motor. The first control scheme guarantees the uniform ultimate boundedness of the closed loop system. The second control scheme guarantees the exponential stability of the closed loop system. Simulation results of the proposed controllers are presented to illustrate the theoretical developments. The simulations indicate that the proposed controllers work well, and they are robust to changes in the parameters of the motor and to changes in the load

Sliding Mode Control of Chaos in a Single Machine Connected to an Infinite Bus Power System

This paper deals with the control of chaos in a power system. A fourth-order model is adopted for the power system. Three controllers are proposed to suppress the chaos and avoid voltage collapse. The controllers are a feedback linearization controller, a conventional sliding mode controller, and a second-order super-twisting sliding mode controller. It is shown that the proposed controllers guarantee the convergence of the states of the system to their desired values. Simulations studies are presented to show the effectiveness of the proposed control schemes

Control of Chaos in a Single Machine Infinite Bus Power System Using the Discrete Sliding Mode Control Technique

Under certain conditions, power systems may exhibit chaotic behaviors which are harmful and undesirable. In this paper, the discrete time sliding mode control technique is used to control a chaotic power system. The objective of the control is to eliminate the chaotic oscillations and to bring order to the power system. Two discrete time sliding mode control (DSMC) schemes are proposed for a fourth order discrete time chaotic power system. The first DSMC control scheme is based on the well-known exponential reaching law. The second DSMC control scheme is based on the recently developed double power reaching law. It is shown that the states of the controlled system converge to their desired values. Simulation results are presented for different values of the gains of the controllers as well as for different initial conditions. These results indicate that both control schemes work well. However, the simulation results show that the second control scheme gave better results since it was able to greatly reduce the chattering problem