Executive Compensation and Corporate Governance

This chapter focuses on the issue of executive compensation, which has had renewed media and policy interest since the 2008 global financial crisis. It presents a literature review on executive compensation, and then creates a framework that includes the main themes. This framework shows how certain factors—such as institutional governance and market governance—cooperate with CEO characteristics and firm factors in order to influence the structure and level of executive compensation, as well as the way performance measures are defined as the basis for setting compensation. The intended and unintended consequences of these interrelationships are also studied.