The DOI matches its Crossref record; 71 of the 71 references it cites were found in a registry or an index.
Lower Salaries and No Options? On the Optimal Structure of Executive Pay
Open accessAbstract
We calibrate the standard principal–agent model with constant relative risk aversion and lognormal stock prices to a sample of 598 U.S. CEOs. We show that this model predicts that most CEOs should not hold any stock options. Instead, CEOs should have lower base salaries and receive additional shares in their companies; many would be required to purchase additional stock in their companies. These contracts would reduce average compensation costs by 20% while providing the same incentives and the same utility to CEOs. We conclude that the standard principal–agent model typically used in the literature cannot rationalize observed contracts.
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Cites
The pricing of options and corporate liabilities
Black, F., & Scholes, M. (1973) · Journal of Political Economy · doi:10.1086/260062 · Cited by 29,074
A Simplex Method for Function Minimization
Nelder, J. A., & Mead, R. (1965) · The Computer Journal · doi:10.1093/comjnl/7.4.308 · Cited by 28,905
Moral Hazard and Observability
Holmstrom, B. (1979) · The Bell Journal of Economics · doi:10.2307/3003320 · Cited by 8,311
The Econometrics of Financial Markets
Campbell, J. Y., Lo, A. W., & MacKinlay, A. C. (2012) · Princeton University Press eBooks · doi:10.2307/j.ctt7skm5 · Cited by 5,875
Performance Pay and Top-Management Incentives
Jensen, M. C., & Murphy, K. J. (1990) · Journal of Political Economy · doi:10.1086/261677 · Cited by 5,083
The Econometrics of Financial Markets
Campbell, J. Y., Lo, A. W., & MacKinlay, A. C. (1997) · doi:10.1515/9781400830213 · Cited by 5,008
Corporate governance, chief executive officer compensation, and firm performance
Core, J. E., Holthausen, R. W., & Larcker, D. F. (1999) · Journal of Financial Economics · doi:10.1016/s0304-405x(98)00058-0 · Cited by 4,335
The Provision of Incentives in Firms
Prendergast, C. (1999) · Journal of Economic Literature · doi:10.1257/jel.37.1.7 · Cited by 3,338
The Determinants of Firms' Hedging Policies
Smith, C. W., & Stulz, R. M. (1985) · The Journal of Financial and Quantitative Analysis · doi:10.2307/2330757 · Cited by 3,255
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Metadata
- Authors
- DITTMANN, I., & MAUG, E.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2007-01-11
- Volume
- 62
- Issue
- 1
- Pages
- 303-343
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2118250026
- Cited by
- 357
- References
- 71
- FWCI
- 73.92
- Type
- journal article
- Language
- en
- Open access
- bronze
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- DITTMANN, I., & MAUG, E. (2007). Lower Salaries and No Options? On the Optimal Structure of Executive Pay. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.2007.01208.x
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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