Executive pay is a controversial political issue with big implications for firm performance. Although public debate focuses on the level of compensation – or at best its sensitivity to firm performance – this column argues that the key issue is its temporal structure. A well designed payment structure can align CEO incentives with long-term shareholder value. The authors recommend lengthening the vesting period of equity and options.
Alex Edmans, Thursday, September 11, 2014
Alex Bryson, John Forth, Minghai Zhou, Tuesday, June 24, 2014
Publicly traded companies are the engine behind China’s growth, which raises the question of how CEO compensation works under an interventionist state. This column presents an analysis of executive compensation in China and a comparison to the West. Chinese listed firms have incentive structures similar to those of the US; in this case, effective compensation policies seem to transcend political boundaries.
Andrea Prat, Oriana Bandiera, Luigi Guiso, Raffaella Sadun, Saturday, May 28, 2011
What do CEOs get up to all day? Most accounts are based on surprisingly small samples. A new study of how CEOs allocate their time yields some surprising results.
Alex Edmans, Tuesday, July 13, 2010
Recovering US insurance giant AIG recently announced that 80% of their executives’ bonuses will depend on the price of their firm’s bonds and only 20% will depend on the price of their equity. This column argues that such moves will better align CEO fortunes with those of all investors – both shareholders and bondholders – and help prevent future financial crises.