Understanding CEO compensation plans is a continuing challenge for directors and investors. The disclosure of these plans is dictated by SEC rules that rely heavily on the “fair value” of awards at the time they are granted. The problem with these numbers is that they are static and do not...

The question of fair executive compensation could be resolved if we develop a framework and measures to determine whether executives are compensated fairly by firms. Executive compensation is a business decision, and it should be based on business performance. This paper presents tools for...