03102oam 22004573a 450 991069830670332120230622022814.0(NBER)w7124(CKB)3240000000021094(OCoLC)233576411(EXLCZ)99324000000002109420230622d1999 fy 0engurcnu||||||||txtrdacontentcrdamediacrrdacarrierExecutive CompensationSix Questions that Need Answering /John M. Abowd, David S. KaplanCambridge, MassNational Bureau of Economic Research1999[Washington, D.C.] :U.S. Dept. of Labor, Bureau of Labor Statistics, Office of Employment Research and Program Development,[1998]1 online resourceillustrations (black and white);NBER working paper seriesno. w7124May 1999.In this article, we focus on how recent research advances can be used to address the following six questions: (1) How much does executive compensation cost the firm? (2) How much is executive compensation worth to the recipient? (3) How well does executive compensation work? (4) What are the effects of executive compensation? (5) How much executive compensation is enough? (6) Could executive compensation be improved? We stress the formal link between executive pay and performance that is provided by stock options and equivalent forms of long term compensation. We compare executive compensation in 12 OECD countries for the period from 1984-1996. There are good reasons why the answers to the first two questions are different. Executive compensation research should be very careful to distinguish the concepts of employer cost and the value to the executive. Agency theory remains the only viable candidate for answering the question about how executive compensation works but the empirical research to date cannot explain very much about the structure of the optimal contract. For this reason, it is also hard to answer the questions about the effects of executive compensation and the adequacy of the amounts of executive compensation, although it is clear that companies can provide both too little and too much contingent compensation, in the context of agency theory. We suggest two fertile areas for research regarding the improvement of executive compensation.Working Paper Series (National Bureau of Economic Research)no. w7124.Executive CompensationCompensation Packages • Payment MethodsjelcCorporate Finance and GovernancejelcCompensation Packages • Payment MethodsCorporate Finance and GovernanceJ33jelcG3jelcAbowd John M125329Kaplan David S282937National Bureau of Economic Research.MaCbNBERMaCbNBERBOOK9910698306703321Executive Compensation3389955UNINA