| Executive compensation has become a significant political, academic, and corporate concern in the wake of the 2008 government bailouts of large financial institutions (Mason-Draffen, 2008). Previous research indicates there may be a connection between compensation and corporate performance (Jonas, 2007). This quantitative, ex post facto research study sought to describe any relationship between annual executive compensation and end-of-fiscal-year financial share price through a correlation analysis of top-executive compensation and Fortune 500 financial industry company stock performance over a five-year period (2003-2007). The results of this study revealed a non-significant relationship between executive compensation and share price using a Spearman's Rho analysis of the top five compensated executives and annual stock price. The author recommends compensation committees follow a BAKE strategy when managing executive compensation practices. The acronym BAKE refers to benchmarking against other companies, aligning compensation to organizational goals, keeping track of executive compensation strategies, and periodically evaluating the compensation plan. Formalizing and adding additional rigor to the process of executive compensation management in financial companies may provide for stronger defense against potential profit-damaging government or activist shareholder-initiated compensation restrictions. |
