Elsevier S & T

An Introduction to Executive Compensation

Balsam, Steven

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Table of contents
  • Copyright Pagev
  • Contentsvii
  • Acknowledgmentsxvii
  • PART I: An Introduction1
  • Chapter 1. Introduction3
  • I. Introduction and Overview3
  • II. Owner–Manager Conflict: Agency Theory5
  • III. Other Theories Explaining and Influencing Executive Compensation7
  • IV. External Influences on the Compensation Package8
  • V. Sources of Data on Executive Compensation9
  • Appendix 1.1. Item 402 of SEC Regulation S–K11
  • Chapter 2. Overview of the Compensation Package35
  • I. Introduction35
  • II. Compensation Package35
  • III. Usage of Major Components of Compensation41
  • IV. Relative Importance of Components of a Compensation Package45
  • V. Magnitude of Compensation Package49
  • VI. Relative Pay of CEOs to Other Top Executives53
  • VII. Summary56
  • Appendix 2.1. An Introduction to Option Pricing Models57
  • Chapter 3. An Introduction to Designing the Executive Compensation Contract59
  • I. Introduction59
  • II. Making the Offer Attractive59
  • III. Providing the Proper Incentives61
  • IV. Designing the Contract to Retain the Executive66
  • V. Minimize Costs to the Corporation69
  • VI. Summary71
  • PART II: The Components of the Compensation Package73
  • Chapter 4. Salary75
  • I. Introduction75
  • II. Incentives79
  • III. Affect on Willingness to Take Risks80
  • IV. How Much?81
  • V. Equity Issues83
  • VI. Political Costs84
  • VII. Financial Consequences85
  • VIII. Summary88
  • Appendix 4.189
  • Chapter 5. Bonuses: Short- and Long-Term91
  • I. Introduction91
  • II. Incentives97
  • III. Effectiveness of Bonus Plans102
  • IV. Political Costs103
  • V. Financial Consequences106
  • VI. Summary111
  • Appendix 5.1. Bonus Formula from Contract Between David A. Stonecipher and Jeffersonpilot Corporatio113
  • Appendix 5.2. Lucent Technologies Inc. 1996 Long Term Incentive Program115
  • Chapter 6. Stock Grants and Options131
  • I. Introduction131
  • II. Incentives139
  • III. Costs144
  • IV. Incentive Effect Versus Dilutive Effect150
  • V. Effectiveness of Stock-Based Compensation151
  • VI. Macro–Market Effects152
  • VII. Alternatives156
  • VIII. Financial Consequences157
  • IX. Political Costs161
  • X. Summary163
  • Appendix 6.1. Nonqualified Stock Option Award Agreement Under the 1989 Stock Incentive Plan165
  • Appendix 6.2. Restricted Stock Award Agreement Under the 1989 Stock Incentive Plan168
  • Appendix 6.3. §422 Incentive Stock Options172
  • Chapter 7. Deferred Compensation175
  • I. Introduction175
  • II. Funding Limitations180
  • III. Incentives181
  • IV. Political Costs184
  • V. Financial Consequences185
  • VI. Summary187
  • Appendix 7.1. Executive Pension Benefits from General Motors Proxy Statement Filed April 20, 1999188
  • Appendix 7.2. Senior Officer Excess Benefit Agreement191
  • PART III: Related Issues201
  • Chapter 8. Ownership of the Corporation203
  • I. Introduction203
  • II. The Affect of Executive Ownership on Incentives207
  • III. The Effect of Executive Ownership on Executive Compensation213
  • IV. The Effect of Director’s Ownership on Executive Compensation215
  • V. The Effect of Large Shareholders and Institutional Ownership on Executive Compensation215
  • VI. Summary218
  • Chapter 9. Corporate Governance219
  • I. Introduction219
  • II. Director Compensation222
  • III. The Effect of the Board of Directors on CEO Compensation228
  • IV. The Effect of the Board of Directors on CEO Turnover235
  • V. Examples of Strong and Weak Boards235
  • VI. An Interesting Response237
  • VII. Summary238
  • Appendix 9.1. Excerpt on Board of Directors from General Electric Proxy Statement Filed With the Sec240
  • Appendix 9.2. Excerpt on Board of Directors from Walt Disney Proxy Statement Filed With the Securiti250
  • PART IV: Considerations in Designing the Executive Compensation Package259
  • Chapter 10. Is Executive Compensation Really That High?261
  • I. Introduction261
  • II. The Relationship Between Executive Compensation and Firm Performance272
  • III. The Politics of Executive Compensation275
  • IV. The Effect of the Political Process on Executive Compensation276
  • V. International Comparisons277
  • VI. Comparisons to Other Occupations282
  • VII. Summary284
  • Appendix 10.1. Selection of Bills Introduced, but not Passed, With the Potential to Affect Amounts,286
  • Appendix 10.2. Resolutions Introduced to Limit Executive Compensation287
  • Appendix 10.3. Laws that Restrict Executive Compensation287
  • Chapter 11. The Effect of Corporate and Executive Characteristics on Designing an Optimal Compensati289
  • I. Introduction289
  • II. Goals292
  • III. The Effect of Corporate Characteristics on the Optimal Contract292
  • IV. The Effect of Executive Characteristics on the Optimal Compensation Contract301
  • V. The Effect of Joint Characteristics on the Optimal Contract306
  • VI. Summary308
  • Chapter 12. Designing a Compensation Contract311
  • I. Introduction311
  • II. Salary311
  • III. Bonus314
  • IV. Stock Compensation322
  • V. Deferred Compensation332
  • VI. Benefits334
  • VII. Summary335
  • PART V: Conclusion339
  • Chapter 13. Recent Trends and Their Implications for the Future of Executive Compensation341
  • I. Recent Trends341
  • II. The Future342
  • III. Conclusions349
  • Glossary351
  • References359
  • Index375
Book details
  • Vendor Elsevier S & T
  • SKU 9780120771264
  • ISBN-13 9780080490427
  • Author Balsam, Steven
  • Category Business & Economics
  • Subject Leadership

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Description eBook delivery & access Reviews
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.

Key Features
* Presents an objective analysis of current executive compensation practices
* Comprehensively reviews of academic literature and extant practice
* Explains and illustrates the various components of the compensation package
* Discusses the incentive, financial reporting, tax, political, equity, and firm value effects of those components