An Introduction to Executive Compensation

General readers have no idea why people should care about what executives are paid and why they are paid the way they are. This book proposes a reason that executives need incentives in order to maximize firm value. It also describes the nature and design of executive compensation practices.

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General readers have no idea why people should care about what executives are paid and why they are paid the way they are. That's the reason that "The Wall Street Journal", "Fortune", "Forbes", and other popular and practitioner publications have regular coverage on them. This book not only proposes a reason - executives need incentives in order to maximize firm value (economists call this 'agency theory') - it also describes the nature and design of executive compensation practices. Those incentives can take the form of benefits (salary, stock options), perquisites (reflecting the status of the executive within the organizational culture. This book is important because it takes the elements of an executive compensation package apart, analyzing them in the contexts of both economic theory and corporate practice and then explains how, under varying conditions, one might construct a compensation package that optimizes an executive's and a corporation's performance.Following are the key features: It presents an objective analysis of current executive compensation practices; comprehensive reviews of academic literature and extant practice; explains and illustrates the various components of the compensation package; and discusses the incentive, financial reporting, tax, political, equity, and firm value effects of those components.