Michael Jensen and Kevin Murphy, "Performance Pay and Top Management Incentives," The Journal of Political Economy, Vol. 98, No. 2, 1990, (p. 225).
Our estimates of the pay-performance relation (including pay, options, stockholdings, and dismissal) for chief executive officers indicate CEO wealth changes $3.25 for every $1,000 change in shareholder wealth. Although the incentives generated by stock ownership are large relative to pay and dismissal incentives, most CEOs hold trivial fractions of heir firm's stock and ownership levels have declined over the past 50 years. We hypothesize that public and private political forces impose constraints that reduce the pay-performance sensitivity. Declines in both the pay-performance relation and the level of CEO pay since the 1930s are consistent with this hypothesis.
Useful Links
- Leverage the following resources to learn more about equity compensation and the ASC 718 and IFRS 2 standards.
- ASC 718 Standard
- IFRS 2 Standard
- Financial Accounting Standards Board (FASB)
- International Accounting Standards Board (IASB)
- Certified Equity Professional Institute
- National Center For Employee Ownership (NCEO)
- National Association for Stock Plan Professionals (NASPP)
- Financial Executives International (FEI)
Recommended Books
Advanced Topics in Equity Compensation Accounting
By Takis Makridis
In this required text for the CEP, published by the NCEO, author Takis Makridis selects a handful of valuation issues, one reporting issue and a hybrid of the above and subjects them to close scrutiny.
Click here to purchase a copy
