CEO’s compensation package must be based on performance indicators
One of the most important factors in an organization's success is its compensation policy. It not only influences how top executives behave, but it also influences the types of executives that an organisation attracts. Executive compensation must be based on performance indicators other than the stock price, such as profits and revenue, as well as sustainability indicators like emissions and safety. One of the researchers suggested that a CEO's pay should be determined by two factors that can be influenced by performance measures: the number of vesting options available and the strike price of these options. While others stated that the level of pay should be determined by how much effort a CEO has put in to build up the company.
Another researcher argued that pays should be based on stock price as well as performance. If performance is strong but the stock price is low enough, it is optimal to pay the CEO nothing, whereas if the stock price is high enough, the CEO must benefit.
