An Empirical Investigation of the Relative Performance Evaluation of Corporate Executives

Abstract

This paper investigates empirically whether top corporate executives are compensated as if their performance is evaluated relative to the performance of competitors.1 This research extends previous investigations into the structural relation between executive compensation and absolute measures of firm performance.2 The premise of these investigations was that tying executive pay to firm performance helps align the goals of executives with the goals of the firm's owners. The efficiency