Ittner, Lambert, and Larcker (J. Accounting Economics (2003)) present compelling evidence that new economy firms rely more on stock-based compensation than do old economy firms, based on 1998 and 1999 data from a proprietary sample of companies. I complement the ILL results by analyzing data...

We document differences in CEO pay and incentives in the US and the UK for the fiscal year 1997. After controlling for size, sector and managerial position, CEOs in the US earn 35% higher cash compensation and 121% higher total compensation (including share options, etc.). Incentives, too, are...

Although exercise prices for executive stock options can be set either below or above the grant-date market price, in practice virtually all options are granted at the money. We offer an economic rationale for this apparent puzzle, by showing that pay-to-performance incentives for risk-averse,...

In 1991, defense contractor General Dynamics (GD) adopted an objective of creating shareholder value through downsizing, restructuring, and exit. Facilitating GD's strategy were a new management team and compensation plans that tied executive pay to shareholder wealth creation. The plans became...

Disclosure rules adopted by the Securities Exchange Commission in 1992 allowed limited managerial discretion in reporting the value of stock options granted. I provide evidence that managers adopted valuation methodologies that reduced reported or perceived compensation and that also reduced...

In 1991, defense contractor General Dynamics engaged a new management team which adopted an explicit corporate objective of creating shareholder value. The company tied executive compensation to shareholder wealth creation, and subsequently implemented a strategy that included downsizing,...

This paper examines how and when CEO debt-like compensation (i.e., “inside debt”) affects debt contracting terms and corporate investment levels. We find a negative relation between inside debt and both R&D and capital expenditures for firms with low financing constraints, but this...

Executive compensation consultants face potential conflicts of interest that can lead to higher recommended levels of CEO pay, including the desires to ldquo;cross-sellrdquo; services and to secure ldquo;repeat business.rdquo; We find evidence in both the US and Canada that CEO pay is higher in...

Investment decisions require trading off current expenditures against future revenues. If revenues extend far enough into the future, the executives responsible for designing long-run investment policy may no longer be in office by the time all the revenues are realized. We present evidence...

The trouble with options is that too many options are granted to too many people. Most options are granted below the top-executive level, and options are often an inefficient way to attract, retain and motivate executives and (especially) lower-level employees. Why, then, are options so...