RICHMOND, VA — (Marketwired) — 10/10/14 — The first step in understanding the incentives provided to CEOs of large public firms is to measure their compensation accurately. In the latest issue of Economic Quarterly, Richmond Fed economist Arantxa Jarque and research assistant John Muth use the available data to construct a measure of annual income that is based on realized compensation, rather than on the expected value of stock and option grants. They discuss the limitations of the available data required to construct this measure, and compare it to other measures recently used in the literature. They also propose a counterfactual exercise to project what annual income for CEOs would have been in different performance scenarios for their firm and present their estimates of annual income and its sensitivity to performance for the period from 1993 to 2012, with a particular focus on the financial industry since the 2007-2008 financial crisis.
You can find the full text of this article and others in the latest issue of Economic Quarterly .
Also in this issue:
by Felipe Schwartzman
by Borys Grochulski
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