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Economic Brief

March 2016, No. 16-3

Measuring CEO Compensation

Arantxa Jarque and David A. Price

Compensation packages for CEOs of large public companies often include grants of restricted stock and stock options, the value of which to the CEO depends on the future performance of the firm, as well as on the terms of the grants. This value, which is key to evaluating the CEO's incentives, can be estimated in a number of ways. The authors use measures based on the expected values and the realized values of pay to compare the compensation of CEOs in a sample of large public U.S. firms and a subset of financial firms before and after the 2007-08 financial crisis.

Additional Resources

Clementi, Gian Luca, and Thomas F. Cooley, "Executive Compensation: Facts," National Bureau of Economic Research Working Paper No. 15426, October 2009.

Fahlenbrach, Rüdiger, and René M. Stulz, "Bank CEO Incentives and the Credit Crisis," Journal of Financial Economics, January 2011, vol. 99, no. 1, pp. 11-26. (A previous version is available online.)

Frydman, Carola, and Raven E. Saks, "Executive Compensation: A New View from a Long-Term Perspective, 1936-2005," Review of Financial Studies, May 2010, vol. 23, no. 5, pp. 2099-2138. (A working paper version is available online.)

Gabaix, Xavier, and Agustin Landier, "Why Has CEO Pay Increased So Much?" Quarterly Journal of Economics, February 2008, vol. 123, no. 1, pp. 49-100. (A previous version is available online.)

Gayle, George-Levi, and Robert A. Miller, "Has Moral Hazard Become a More Important Factor in Managerial Compensation?" American Economic Review, December 2009, vol. 99, no. 5, pp. 1740-1769. (A previous version is available online.)

Hall, Brian J., and Kevin J. Murphy, "Stock Options for Undiversified Executives," Journal of Accounting and Economics, February 2002, vol. 33, no. 1, pp. 33-42. (A working paper version is available online.)

Jarque, Arantxa, "CEO Compensation: Trends, Market Changes, and Regulation," Federal Reserve Bank of Richmond Economic Quarterly, Summer 2008, vol. 94, no. 3, pp. 265-300.

Jarque, Arantxa, and Brian Gaines, "Regulation and the Composition of CEO Pay," Federal Reserve Bank of Richmond Economic Quarterly, Fourth Quarter 2012, vol. 98, no. 4, pp. 309-348.

Jarque, Arantxa, and John Muth, "Evaluating Executive Compensation Packages," Federal Reserve Bank of Richmond Economic Quarterly, Fourth Quarter 2013, vol. 99, no. 4, pp. 251-285.

Shue, Kelly, and Richard Townsend, "Growth through Rigidity: An Explanation for the Rise in CEO Pay," National Bureau of Economic Research Working Paper No. 21975, February 2016.

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