Research Summary
Research Summary
Executive Compensation
Description
Professor Meulbroek is investigating the gap between what equity-linked compensation costs the firm and what it is worth to managers. This gap arises because such compensation prevents managers from fully diversifying their holdings, so managers must bear firm-specific risks that fully-diversified do not. The magnitude of that gap can be surprisingly large, and Professor Meulbroek is exploring how the magnitude should affect the design of firms compensation plans, and how it affects the markets interpretation of managerial sales. She is also examining the incentives produced by equity-linked compensation, how those incentives change with movements in the firms stock price, or as the time until option expiration nears. Finally, she is investigating how a compensation plan that rewards managers for firm performance relative to a benchmark market or industry index should be structured, and the value, both to the firm and to managers, of such a compensation plan. Professor Meulbroeks executive compensation work comprises both research and cases.