We investigate the economic forces that influence noncompliance with mandatory compensation disclosures and the effect of a subsequent focused enforcement action. We utilize SEC evaluations of compensation disclosures mandated by rules adopted in 2006 to examine whether noncompliance is associated with excess CEO compensation, proprietary costs, or previous media attention. We further test whether subsequent CEO compensation declines after the SEC publicly identifies noncompliance. We construct measures of defective disclosures from SEC critiques and find that disclosure defects are positively associated with excess CEO compensation and media criticism of CEO compensation during the previous year. We find no evidence supporting the contention that compensation disclosure defects are associated with proprietary costs. Furthermore, we are unable to document that the level of disclosure defects identified by the SEC is associated with a reduction in excess CEO compensation in the subsequent year. Data Availability: Data are available from public sources identified in the paper. JEL Classifications: M52, G32, G38.

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A firm's board of directors, based on its risk tolerance or ''appetite,'' sets the corporate objectives. It is then the management's job to meet the objectives by adopting appropriate strategies. However, the board can design compensation policies to encourage desired management strategy choices. This paper explores the extent to which management compensation policies are aligned with strategy choices for obtaining new technology. Firms obtain new technology either through internal R&D or through acquisitions, often labeled ''make'' and ''buy'' strategies, respectively. The ''make'' strategy is inherently more risky, with much of the high risk idiosyncratic. Furthermore, U.S. GAAP requires that R&D expenditures be expensed but allows capitalization of acquisition costs, thus a firm using the ''make'' as opposed to the ''buy'' strategy will experience a greater negative effect on accounting earnings. I hypothesize that these differences will lead risk-averse and utility-maximizing managers to implement the ''buy'' strategy if their compensation is heavily weighted on accounting-based performance measures. Conversely, managers with more stock-based compensation, especially stock options, are more likely to choose to develop new technology internally. Using data from U.S. high-tech industries and a simultaneous equations regression framework, I find evidence consistent with the above hypotheses.

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