Computer industry executives: An analysis of the new barons' compensation

In this paper we study the compensation determinants for CEOs in the comput er industry and compare these findings with a large sample of firms from ot her manufacturing and service industries. We examine whether superior perfo rmance is rewarded by higher levels of compensation and find cash-based com pensation, such as salary and bonus, is influenced by performance. Dependin g on the growth prospects of the company, pay is tied either to accounting measures of performance or to stock return. In contrast, stock-based compen sation, such as options and restricted stock awards, is not reflective of p erformance but depends upon the firm's growth. Two other interesting findin gs are that the prevalent use of stock-based compensation in the computer i ndustry does not appear to be the result of computer firms being "cash star ved." In addition, stock-based compensation does not appear to lead to larg er executive stock ownership, as is widely believed.