Recent years have seen executive pay shift from cash to stock options in a bid to link pay to performance. However, this has in turn led to an explosion of executive pay that begs the question, "How much is enough?"
             In this essay, I will first clarify what constitutes executive pay, before highlighting the theory behind the increases in this pay and well as some of the arguments for and against these increases.
             Traditionally executives' pay packets were a straight salary. More recently, executives have been receiving compensation in the form of a straight salary plus certain extras. These include:
             · Bonus. A sum of money awarded if certain set performance criteria are met, (usually yearly).
             · Stock options. The option to buy the companies stock at a specified price at a future date.
             Stock options and bonuses are the main tool used to enhance performance, however other variations exist, for example. Phantom stock plans enable the C.E.O. to gain the benefits of shares such as dividends and appreciation without actually owning any. Reload options enable the executive to sell his options at the price when the shares were at their highest. Restricted stock awards are only exercisable when performance criteria are met. Option swaps may be awarded when, for reasons not related to the C.E.O., share prices drop and a re-negotiation of the contract is necessary. The option swap swaps the initial stock options for new lower priced options. Golden parachutes are a large payment made to chief executives in case of termination of their contracts due to a take-over.
             What is the reason for this change in executive compensation?
             There are a number of reasons that executive compensation has changed format.
             1. The logic behind stock options is simple, if a C.E.O. were awarded stock options at a certain value it would be in his interests to see that the value of the stocks increased through his competent ru...