Performance Regularity: A New Class of Executive Compensation Packages

24 Pages Posted: 23 Jan 2012 Last revised: 11 Jan 2014

See all articles by Carole Bernard

Carole Bernard

Grenoble Ecole de Management; Vrije Universiteit Brussel (VUB)

Olivier Le Courtois

EM Lyon (Ecole de Management de Lyon) - Department of Economics, Finance, Control

Date Written: January 23, 2012

Abstract

The ability of standard executive stock options to incite managers to adequately select the assets of their firm has been extensively questioned by academics and practitioners. However, very few alternatives exist or have been proposed to better control the investment strategies of top managers. The present article studies the evaluation and sensitivity of a new class of executive stock options well designed for the control of managers. Such packages are aimed at giving incentives to CEOs to maintain a regular performance over time and a stable volatility level. The importance and implications of the choice of the different parameters as well as their robustness with respect to standard financial criteria are examined. In brief, this article studies in a utility-based framework a new type of executive stock options that can be useful to protect and enhance the economic performance of corporations.

Keywords: Executive stock options, Parisian options, Optimal compensation

JEL Classification: D11, G13, G34, J33

Suggested Citation

Bernard, Carole and Le Courtois, Olivier Arnaud, Performance Regularity: A New Class of Executive Compensation Packages (January 23, 2012). Asia-Pacific Financial Markets, Vol. 19, No. 4, pp. 353-370, 2012 . Available at SSRN: https://ssrn.com/abstract=1990243

Carole Bernard (Contact Author)

Grenoble Ecole de Management ( email )

12, rue Pierre Sémard
Grenoble Cedex, 38003
France

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Olivier Arnaud Le Courtois

EM Lyon (Ecole de Management de Lyon) - Department of Economics, Finance, Control ( email )

23, av. Guy de Collongue
69134 Ecully Cedex
France

Register to save articles to
your library

Register

Paper statistics

Downloads
104
rank
243,611
Abstract Views
650
PlumX Metrics