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EXECUTIVE COMPENSATION

What is this practice and how effective is it?

A board that uses an executive compensation plan assumes that it can motivate senior executives by well-designed compensation packages that include some element of pay for performance. The underlying assumption is that the plans align the interests of executives with those of shareholders. But the evidence is tenuous at best. However, as we will show, there are a number of ways that boards can design schemes that reward long-term performance while minimizing the toxic effects of these schemes.

Alternative names and related topics: executive incentives; share options; compensation committees

The mean salary plus bonus for CEOs, adjusted for inflation, grew by 58 percent from ...

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