Performance Terms in CEO Compensation Contracts

Review of Finance, Forthcoming

39 Pages Posted: 7 Mar 2014

See all articles by David De Angelis

David De Angelis

Rice University - Jesse H. Jones Graduate School of Business

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah; European Corporate Governance Institute (ECGI)

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Date Written: March 5, 2014

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. Our evidence is consistent with predictions from optimal contracting theories: firms rely on performance measures that are more informative of CEO actions.

Keywords: CEO Compensation, Market-based Performance Measure, Accounting-based Performance Measure

JEL Classification: G34, G38, J33

Suggested Citation

De Angelis, David and Grinstein, Yaniv, Performance Terms in CEO Compensation Contracts (March 5, 2014). Review of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2405146

David De Angelis (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

HOME PAGE: http://www.de-angelis.com

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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