NBER Working Papers and Publications
|May 1999||Executive Compensation: Six Questions that Need Answering|
with John M. Abowd: w7124
In this article, we focus on how recent research advances can be used to address the following six questions: (1) How much does executive compensation cost the firm? (2) How much is executive compensation worth to the recipient? (3) How well does executive compensation work? (4) What are the effects of executive compensation? (5) How much executive compensation is enough? (6) Could executive compensation be improved? We stress the formal link between executive pay and performance that is provided by stock options and equivalent forms of long term compensation. We compare executive compensation in 12 OECD countries for the period from 1984-1996. There are good reasons why the answers to the first two questions are different. Executive compensation research should be very careful to distingu...
Published: Journal of Economic Perspectives, Vol. 13, no. 4 (Fall 1999): 145-168. citation courtesy of