Pay for the Right Performance
58 Pages Posted: 23 Mar 2010 Last revised: 20 Aug 2012
There are 2 versions of this paper
Pay for the Right Performance
Performance Terms in CEO Compensation Contracts
Date Written: August 17, 2012
Abstract
In December 2006, the Securities and Exchange Commission issued new rules that require enhanced disclosure on how firms tie CEO compensation to performance. We use this new available data to study the terms of performance-based awards in CEO compensation contracts in S&P 500 firms. We observe large variations in the choice of performance measures and horizons. Our evidence is consistent with predictions from optimal contracting theories: firms rely on performance measures that are more informative of CEO actions. Furthermore, our results do not support the argument that entrenched CEOs rig the contractual terms toward performance measures that are easier to manipulate.
Keywords: CEO Compensation, Market-based Performance Measure, Accounting-based Performance Measure, Performance Horizon
JEL Classification: G34, G38, J33
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
Are CEOS Really Paid Like Bureaucrats?
By Brian J. Hall and Jeffrey B. Liebman
-
The Other Side of the Tradeoff: The Impact of Risk on Executive Compensation
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
Good Timing: CEO Stock Option Awards and Company News Announcements
-
The Use of Equity Grants to Manage Optimal Equity Incentive Levels
By John E. Core and Wayne R. Guay
-
The Other Side of the Tradeoff: the Impact of Risk on Executive Compensation
-
Stock Options for Undiversified Executives
By Brian J. Hall and Kevin J. Murphy