Executive Compensation and Board Governance in US Firms

This paper investigates US executive compensation and governance. I find on average executive pay is positively correlated to firm performance and firm size. Executive pay contracts contain significant equity incentives. The use of restricted stock has become more important over time. Stock options remain an important part of executive pay. Compensation committees are generally independent and there is little evidence they result in 'too high' CEO pay. The Dodd‐Frank Act changed the corporate governance landscape. Firms use compensation consultants that are generally engaged by the board and not management. 'Say‐on‐Pay' gave shareholders a non‐binding mandatory vote on executive pay. Typically, stockholders endorse executive pay plans with very few resolutions failing.