Duration of Executive Compensation

Extensive discussions on the inefficiencies of �short-termism� in executive compensation notwithstanding, little is known empirically about the extent of such short-termism. We develop a novel measure of executive pay duration that reflects the vesting periods of different pay components, thereby quantifying the extent to which compensation is short-term. We calculate pay duration in various industries and document its correlation with firm characteristics. Pay duration is longer in firms with more growth opportunities, more long-term assets, greater R&D intensity, lower risk, and better recent stock performance. Longer CEO pay duration is negatively related to the extent of earnings-increasing accruals.