What are the Real Concerns in the Design of CEO Compensation Contracts

The broadening controversy surrounding executive compensation packages has made it increasingly important to understand the process by which these packages are designed. We provide a deeper analysis of this process than exists elsewhere in the literature because we interview individuals actively involved in the design and implementation of CEO compensation contracts (CEOs, directors, compensation advisors, institutional investors, and regulators). This compliments the existing empirical and theoretical research by formally examining the concerns of those involved in the design of executive compensation packages and comparing them with the issues at the heart of the academic discussion. Though all of our interviewees believe that optimal contracts are possible, we find that our participants had very different concerns about the design and implementation of these arrangements based on their role in the process.