Graduation Year

Fall 2010

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Henrik Cronqvist


Critics often cite poor executive compensation schemes as one of the leading causes of the recent credit crisis. This paper investigates whether compensation structures at the end of the 2006 fiscal year created incentives for Chief Executive Officers (CEOs) in the oil industry to take on excessive risk, which subsequently may have lead to weaker firm performance during the crisis. I find no evidence to support the argument that higher pay sensitivity through option and other incentive awards lead to worse firm performance. In fact, results do not provide any evidence that company performance during the crisis was related to CEO incentives.