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A concise accounting-and-economics guide to how, why, and how much top corporate executives are paid—covering pay components, accounting treatment, disclosure, history, economic theory, and international comparisons.
A profile of this book is on the way.
What it’s about
Executive Compensation: Accounting and Economic Issues demystifies one of the most contentious topics in corporate governance—how CEOs and their teams are paid. Written by a veteran accounting professor, it explains the composition and objectives of pay contracts, walks through the actual calculations, journal entries, and SEC disclosures required for salary, bonuses, stock options, restricted stock, SARs, and pensions, and situates all of it within an 80-year historical arc shaped by regulation and unintended consequences. Grounded in agency theory and empirical research (efficient contracting vs. managerial power), the book shows why pay exploded in the 1990s via stock options, how it moderated after the tech crash and subprime meltdown, and how U.S. pay compares to other countries. Above all, it argues that performance-based compensation—while designed to align executives with shareholders—remains the leading incentive structure driving short-term financial focus and potential accounting manipulation. It is a valuable supplement for accounting, finance, and governance courses and for professionals, board members, and policymakers.
The through-line
- Who it’s for
- An accounting/finance student, professional, board member, or policymaker who wants to genuinely understand how executives are paid, accounted for, and regulated.
- The problem
- Executive compensation is complex, politically charged, and buried in technical accounting rules, disclosures, and shifting regulation. They feel confused or outraged by headline pay numbers and unsure whether pay is justified or manipulated.
- The plan
- Learn what executive compensation is—its components and contractual objectives.
- See how specific pay agreements affect corporate behavior and performance.
- Master the accounting: calculations, journal entries, and SEC disclosures for pay components.
- Study the historical and regulatory record since the 1930s to see what has worked.
- Apply economic theory and empirical evidence (agency, efficient contracting, managerial power).
- The payoff
- The reader can read and interpret proxy and 10-K compensation disclosures, understand the journal entries behind them, and evaluate pay against firm size, risk, and performance with informed, evidence-based judgment.
See our guide
Related profiles we’ve built
Additional reading
- Pay without Performance: The Unfulfilled Promise of Executive Compensation · Lucian Bebchuk and Jesse Fried
This book is presented as the primary academic work arguing that high executive pay is a result of the 'managerial power' thesis, where executives exploit weak corporate governance and captured boards to extract rents, rather than being a product of arm's-length bargaining.
- The Real Story Behind Executive Pay: The Myth of Crony Capitalism · Steven N. Kaplan
This article is excerpted as the main counter-argument to Bebchuk and Fried, contending that high CEO pay is a result of market forces and a competitive 'market for talent,' similar to star systems in sports or entertainment, and is not primarily due to governance failures.
- Bonus Questions: Executive Compensation in the Era of Pay for Performance · Charles M. Yablon
Provides a historical overview of executive compensation, tracing its evolution from the era of owner-managers through the conglomerate mergers and hostile takeovers, leading to the modern focus on performance-based pay and incentive alignment.
- Are American CEOs Overpaid, and, If So, What If Anything Should Be Done About It? · Richard A. Posner
This article offers a prominent law and economics perspective that largely sides with the managerial power thesis, arguing that feeble board incentives and conflicts of interest lead to excessive pay. It also proposes several regulatory reforms, such as enhanced disclosure and back-loaded compensation.
- Power In and Around Organizations · Henry Mintzberg
The author cites this as the 'best academic handling of how environmental factors affect organization performance,' which is the first step in the book's reward design process.
- Competitive Strategy: Techniques for Analyzing Industries and Competitors · Michael E. Porter
This book provides the foundational concepts of cost-based, differentiated, and focused business strategies, which the author uses as a key framework for aligning rewards with company strategy.
- Organizational Capability: Competing From the Inside Out · David Ulrich and Dale Lake
This book is recommended for understanding the concept of organizational capabilities, a crucial link between business strategy and people strategy in the author's model.
- People, Performance, & Pay · Thomas P. Flannery, David A. Hofrichter, and Paul E. Platten
The author references this book for its framework of four general cultural types (process, functional, network, time-based), which is helpful in analyzing the 'People Strategy' component of the design process.
- The Structuring of Organizations · Henry Mintzberg
Recommended for its in-depth synthesis of research on organizational structure, a key element of the 'People Strategy' analysis.
- Officer Compensation Report · Panel Publishers
Listed as a related publication by the publisher, likely offering detailed survey data and analysis on executive pay levels and practices.