Executive Compensation: Facts
In this paper we describe the important features of executive compensation in the US from 1993 to 2006. Some confirm what has been found for earlier periods and some are novel. Important facts about compensation are that: the compensation distribution is highly skewed; each year, a sizeable fraction of chief executives lose money; the use of equity grants has increased; the income accruing to CEOs from the sale of stock has increased; regardless of the measure we adopt, compensation responds strongly to innovations in shareholder wealth; measured as dollar changes in compensation, incentives have strengthened over time, measured as percentage changes in wealth, they have not changed in any appreciable way.
We are very grateful to Dave Backus, Heski Bar--Isaac, Kose John, Laura Veldkamp, and Larry White, as well seminar attendants at the Minneapolis Fed, NYU, the 2008 Midwest Macro Conference in Philadelphia, SED Meeting in Cambridge, and EEA conference in Milan, for their comments and suggestions. All remaining errors are our own responsibility. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.