Posted: June 7th, 2022

Do you think corporate America’s increasing reliance on stock-based compensation, particularly for executives, has been good or bad, and why?

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The greatest driver of executive wealth, by far, is stock-based compensation. As Brian Hall explains in “Incentive Strategy II,” the trend toward stock-based compensation really took off in the late 1980s and early 1990s as a result of a wave of leveraged buyouts that were perceived to be successful largely through their heavy reliance on stock-based compensation for the new management teams. This form of compensation was thought to make the new managers think and act more like owners. If it worked for LBOs, why wouldn’t it work for the rest of corporate America?
Do you think corporate America’s increasing reliance on stock-based compensation, particularly for executives, has been good or bad, and why?
How do you feel when you read about an executive making tens of millions of dollars in stock-based compensation?
Does it make a difference if the shareholders have benefited by tens of billions of dollars in increased market capitalization of the firm?

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