1

1 2 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 5 2

1 1 Reservation Value 2 3

1 ( ) 2 Vesting Period VestedOptions 5-10 At- the- money Option Fair Marke Value Option In- the- money Options Discount Option Out-of-the-money options Premium option Cashless Exercise Programs 3 Phantom Stocks Appreciation Rights 4

4 5 5 5

6 2% 10% 20% 15% 2. 10 1 2000 500 3000 5500 1984 0 2000 63 1 6

2 23 2000 1 1996-2001 1 12 2 7

1 1996 2001 1996 2001 9 6 18 12 24 37 13 6 6 24 18 23 39 16 0 21 21 26 45 19 8 20 12 27 46 19 32 22 19 51 68 17 23 6 22 16 26 42 16 Hall 2002 2 1992 500 110 2000 1190 2002 710 1992 500 2200 2000 2.38 2002 1.41 3 90 500 1992 350 2000 1470 1992 80 2000 720 9 3 2002 500 940 40 1 80 KKR LBO 90 8

80 3 3 1980-1999 LBO 2 1992 1994 100 9

3 30 4 1970 2002 1970 500 30 2002 90 360 2000 570 90 90 4 1970-2002 10

Hall Murphy 2003. 2002 2002 1177 2002 1 1 1 2002 11

2002 2002 120324 2002 3850 1600000 ST 2001 2003 1998 2000,2000 2002 5 2 2002 2002 2002 2002 1177 1177 1177 120324.4027 115012.6610 125636.1147 86667.0000 81033.0000 86467.0000 3850.00 3533.00 3559.00 1600000.00 1600000.00 1600000.00 3550.9262 3808.5419 3761.0166 5 2002 12

180 160 140 165 158151 139 120 100 99 80 60 40 20 61 69 69 54 44 32 21 12 14 15 11 5 8 7 6 3 5 4 6 1 18 0 20000 60000 100000 140000 180000 220000 260000 300000 340000 380000 420000 460000 500000 2002 2 6 2002 13

2002 7 2002 2002 3 14

1985 CEO 1985 2000 CEO 63 1998 1998 10 6 1998 11 25 1998 11 25 794 1177 67.4 399497 4598937 2. 15

16 1 1998 50 1999 7 1 2 20 80 20 3 4 5 6

17 H H 2.73 1 30% 70% 100% 2001 2001 1 2 3 4 5

2001 1 20% 30% 2 3 5 70 1999 8 1999 2000 18

19 5 1500 3 70 6 1998 2 6 1999 1.5 70 30 80 20

20 10 5 80 20 10% 10% 3 2003 3

3. 1 21

2 3 22

4 4. 1 23

Enron Sunbeam 1999-2001 A 0.01 4 5 0.1 0.023 0.029 2001 2 Black Sholes Black Sholes Risk Neutuality 24

Black Sholes 1. 2. Hall Murphy 2000 2002 V/C 1 V/C 2 V/C 3 V/C 3 25

, 1. 1 2 Compensation Consultant Fama Jensen Williamson 1985 Comdisco 1986-1988 300 Coarse 1937 26

Newman Mozes 1997 161 1 Anderson 2000 10 1994 5 100 100 2 Murphy Bebchuk 27

1998 1500 27 A B C 1998 25 28

A 1997 500 81 B C D 1 1 Baker, Jensen Murphy, 1988 Core Holthausen Larcker 1999 29

Gillian 2001 Bizjack Lemmon Naveen 2000 100 96 96 Wade Porac Pollack 1997 500 1987 1992 3 30

A B 31

2. 1 FASB Accountng Principle Board ASB 1972 ASB25 1995 FASB FAS123 Fair Market Value Black Scholes FASB ASB 25 2002 FASB 2003 200 1998 FASB Variable Accounting 32

4 4 1 2 EBITDA 400 100 Fixed Accounting Variable Accounting Marked To Market 2 2003 3 FASB FASB IASB A B. C. 33

Murphy 2003 1998 12 FASB 6 6 6 6 A. 2 B 2 Baumol,W.J. and B.G.Malkiel, Stock Options Keep the Economy Afloat, The Wall Street Journal, April 4, 2002 34

C Aboody 1996 D Black Scholes E. 3 F 3 4 4 3 3 Bolton, Patrick, Scheinkman,Jose, Xiong,Wei,(2003), Executive Compensation and Short-Termist Behavior in Speculative Markets, NBER,P26 35

3. 4 4 Andjekovic, Aleksandar, Boyle,Glenn, McNoe,Warren(2000), Public Disclosure of Executive Compensation: Do Shareholders Need to Know? 36

1 5 A. B 5 C 3 D. 5 E. F. G. H. 37

5 2 6 Yermack 1997 Aboody Kasznik 2000 Ferri 2003 20 CAR 11.8 38

2.7 Senario Analysis Kedia 2003 50 4 39

40

3 1 1 1 CliffVesting 2-4 2 StraightVesting 3 Stepped Vesting 41

4 Performance Vesting 5-10 1999 50 Trading Windows Blackout Periods Enron Sarbanes Oxley 12 1 5 42

EVA 43

EVA 2 44

5 Self-tender Offer At Fixed Price Dutch Auction A. 5 2000 45

B C. D. E. 46

A B C 3 2 1 Leverage Fragility 47

5 $0 $0 $0 $0 $0 25 25 8 25 2 50 50 31 50 19 75 75 63 75 54 100 100 100 100 100 125 125 140 124 150 150 150 183 148 215 Brian Hall 2002 Equity-Pay Design for Executives P12 50 5 6 100 Black-Scoles 2 Black-Scoles Normalized 100 5 50 83 5 50 75 50 69 92 50 75 81 98 1999 1 3 2001 40 6 Lognormally Distributed 8 100 6 Hall Knox 48

100 12.5 100 5 180 100 8 60 30 5 8 12.5 5 60 30 52 25 8 2 49

Back Door Repricing 20 90 1992-1995 1.3 806 30 50 217 60 31 2 35.4 Chance 2000 2 50

7 Retention Incentives 7 Lucian Arye Bebchuk, Jesse M.Fried and David I. Walker, Managerial Power And Rent Extraction in the Design of Executive Compensation, at 74-75, NBER working paper(2002) 51

3 A. Mega-grants Up-frontGrants B. FixedValue Grants Black-Scholes C. Fixed Number Grants 6 52

53 3 1 10 30 70 90 Level3 12.5 30 10 80 50 SkewedTheRight

10 Rm Firm-Speific Risk Ri 100 Rm 100Rm 50 50 Beta 1 Rf Rm-Rf Ri Rm Ri 50 100 Rm 50 100 Rm+Ri Rm 0.5Ri 100 Rm 0.5Ri 100Rm 50Ri 100 50 50 54

Himmelberg Hubbard 2 55

A 100 20 80 B C Hall Murphy 2002 10 56

Level 3 0 UnderlyingAsset 100 Delta Delta Beta 0 4 1 2 57

3 1 5 1 58

Total Shareholder Return V C 59

- 2 1 2 3 2 60

1998 2 6 1 2 3 2 1998 1.334 266.8 15 17.8 61

4 5 15 15 1 2 62

3 4 3 600840 H 63

4 64

(1) 2002 11 8 ( ) 2003 3 10 4 6 196 6.9 2 65

1 2 5 1 2 66

3 Bebchuk, Lucian Arye and Jesse M. Fried, 2003. Executive Compensation as an Agency Problem, The Journal of Economic Perspectives, Vol. 17, No. 3, Summer 2003. Core, John E., Wayne R. Guay, and David F. Larcker, 2003. Executive Equity Compensation and Incentives: A Survey, FRBNY Economic Policy Reveiew, April 2003. Hall, Brian J. and Kevin J. Murphy, 2003. The Trouble with Stock Option, The Journal of Economic Perspectives, Vol. 17, No. 3, Summer 2003. Hall, Brian J., Equity-Pay Design for Executives, Harvard Business School course materials, September 2002. Jensen, Michael C. and Kevin J. Murphy, 1990. Performance Pay and Top-Management Incentives. Journal of Political Economy, Vol. 98, No. 2 (April 1990). Meulbroek, Lisa K., 2001. The Efficiency of Equity-linked Compensation: Understanding the Full cost of Awarding Executive Stock Option. Financial Management. Vol. 30, No.2 (2001). 2001 67

2000, 2000 1 2003 2000, 3 2003 2003 8 68