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Value-Based CEO Equity Grants
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AI
DOI：10.1017/S0022109025000018.png)
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Abstract
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We document firms often determine CEO equity grants based on a predetermined dollar value (value-based equity grant) instead of on the number of shares (share-based grant). Value-based equity grants weaken the relationship between stock performance and CEO equity pay, lower CEO portfolio delta, and slow firms' investment in R&D. We find that retention pressure is a key reason for the use of value-based equity pay, while governance could also matter. Overall, this paper alerts boards to the unintended consequences of pursuing a target pay level or pay structure because such practices can lead to value-based equity grants in CEO compensation.
Keywords:
PAY
COMPENSATION
MARKET
PERFORMANCE
FIRMS
DISCLOSURE
DYNAMICS
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