I investigate the relation between the structure of CEO compensation and the investment horizons of a firm’s institutional investors and find results consistent with the assertion that short-sighted institutions’ focus on shortterm earnings leads firms to grant more options with higher sensitivity to stock price. In contrast, the percentage holdings of long-term investors are negatively correlated with the use of options and the sensitivity of total CEO equity incentives to changes in stock price. Further results suggest that firms with higher short-term institutional ownership are more concerned about a negative earnings surprise and that when determining annual bonuses, they punish their CEOs more severely. In total, the analyses provide evidence that the investment horizon of institutional investors is associated with firms’ CEO compensation policies. * I thank Christine Botosan, Mary Ellen Carter, John Core, William Cready, Fabrizio Ferri, Rachel Hayes, Lee-Seok Hwang, Li Jin, Ella Mae Matsumura, Martin Wu, and workshop participants at the University of Illinois at UrbanaChampaign, at the University of Utah, at the University of Wisconsin-Madison, at Korea University, at Seoul National University, and at the Korea Advanced Institute of Science and Technology (KAIST) for many helpful comments. Many helpful comments were also received from conference participants at the 4 Asian Corporate Governance Conference in Seoul, South Korea, at the American Accounting Association Annual Meeting, at the Mid-year Meeting of the American Accounting Association’s Management-Accounting Section, and at the 16 Annual Conference on Financial Economics and Accounting (FEA) at the University of North Carolina at Chapel Hill. I gratefully acknowledge financial support from the Institute of Management Research at Seoul National University. This work was also supported by Research Settlement Fund for the new faculty of SNU. ** Assistant Professor, College of Business Administration, Seoul National University, 599 Gwanangno, Gwanak-gu, Seoul, Korea, 151-916 (jshin@snu.ac.kr), Phone: +85-2-880-6940 94 Seoul Journal of Business