Executive Compensation: Six Questions That Need Answering

John M. Abowd and David S. Kaplan


Despite being in its infancy, executive compensation research focusing on the effects of stock and stock-option holdings has already yielded large dividends, and has the potential for much more. We review the basic concepts of this methodology and their importance for answering the following six questions about US executive compensation:

  1. How much does it cost?
  2. How much is it worth?
  3. How does it work?
  4. What are its effects?
  5. How much is enough?
  6. Could it be improved?