Abstract
CEOs face constant scrutiny over their compensation packages. This scrutiny has only intensified amid discussions of CEO-to-employee pay ratios and income inequality nationwide. CEO retirement packages are criticized as camouflage compensation used to award excessive compensation to CEOs and were, prior to 2006, less transparent than they are now. Thanks to the transparent disclosures now required by the SEC, we have a better understanding of the types and amounts of compensation owed to CEOs afterthey depart or retire,termed inside debt. I investigate whether all CEOinsidedebt components sharesimilarincentiveeffects andoffers some thoughtson how companies might structure these packages to be most effective. I discuss the structure and incentive effects ofthe two primary components ofinside debt: deferred compensation and supplemental executive retirement plans (SERPs). I explain why inside debt, particularly CEO SERPs, may actually help companies manage firm risk. Finally,I outline the best ways to structure inside debt so thatitfunctions as a resource to manage firm risk and foster a long-term perspective rather than mirroring the incentive effect of equity, increasing risk, and encouraging a myopic focus.
