The Structure and Level of Executive Pay



Many features of executive compensation, like high and increasing pay packages, large option holdings, and generous severance pay, are often cited as proof that current compensation practice is deeply flawed. In his inaugural address, Ingolf Dittmann reviews the recent literature on executive pay and argues that these features can be explained by efficient contracting arrangements. The key to understanding executive compensation is to recognize the behavior firms want to induce with executive pay. Dittmann concludes that the government should neither restrict executive pay nor any of its components. Instead, politics must force firms to disclose the compensation packages of its top executives in detail, so that shareholders have enough information to intervene if that is necessary.
Ingolf Dittmann received his Ph.D. from Dortmund University and his Habilitation (a second German degree) from Humboldt-University at Berlin. He also spent one year as a visiting scholar at the University of California at San Diego. His research has been published in leading international journals including the Journal of Finance and the Journal of Econometrics and has won several best-paper awards. Ingolf Dittmann is member of the Tinbergen and the ERIM research institutes and chairs the research project "Explaining Stock Options in Executive Compensation" that is financed by a NWO vidi grant.

Contact information:
Ronald de Groot