Welcome to the Financial Times Lexicon

Browse thousands of words and phrases selected by Financial Times editors and suggest new terms for the glossary.

 

Term of the day

pay-performance sensitivity

This is a measure to find out if a chief executive is compensated appropriately according to how well s/he runs the company. Pay-performance sensitivity is the change in a chief executive's payoff that is associated with a given performance of the company that s/he leads.

In its simplest incarnation, the pay-performance sensitivity is the correlation between a chief executive pay and stock return a cross a large number of chief executives and their companies.

Pay-performance sensitivity is...