CEO pay at the crossroads of Wall Street and Main: Toward the strategic design of executive compensation

Executive Overview Incentive or performance contingent compensation plans are rapidly becoming the norm in corporate America, as boards of directors attempt to make executives more accountable to shareholders. However, incentive plans also expose executives to risk, and may also impart a short-term bias on their decision-making processes. This article suggests that the tension between the pressures for accountability and long-term decision making can be managed by aligning firm strategy with an incentive plan that is based on an appropriate performance criteria.