Abstract
The purpose of this article is to learn the new developments in executive compensation. The article is based on research undertaken by various organisations. The trend for top executive compensation in the United States increasingly is being tied to individual and corporate performance. Of the compensation packages, there is an increasing trend of paying equity (stock and stock options) over cash. One conflict would be that executives would control so much stock that their decisions will be aimed at keeping the stock price up, as opposed to promoting the long‐term health of the company. Corporate performance was analysed by considering three widely used measures: total return to shareholders; rate of return on equity; and improvements in pretax profit margins. Although CEO’s compensation is at very high levels, it represents a fractional part of a company’s expenses. The positive impact a great CEO can have is enormous and companies can not afford to lose it.
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