“Executive Compensation: The Role of Inside Debt and Vesting Equity in Aligning Incentives and Managing Risk. Part I”

Abstract

Article 1 introduces CEO compensation plans, executive behaviour, and corporate debt costs. Pay package design and equity have 
sparked heated debates in Corporate Finance literature, particularly excessive and misaligned compensation packages’ role in major economic crises, including the Global Financial Crisis (2008). Pay inequality is worsened by the wide gap between CEO earnings and those of the average worker, with recent examples raising ethical and strategic issues. Addressing these issues requires a focus on effective pay design, balancing short- and long-term objectives, and aligning compensation with corporate performance. Boards must carefully construct strategies integrating governance, incentive alignment, and ethical considerations. Considering that the US market has global implications, this study is restricted to investigating US corporations. The findings for Articles 2 and 3, however, at the macro level filter to the micro level, making this study relevant to local economies. I have not updated the data, retaining the original tables and findings from my dissertation. The update could be easily done for a later article if I could access the statistical programs and the relevant databases.