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This article discusses the pay packages of executive officers at internetrelated business. Generally, the executives’ total compensation include salary, bonuses, commissions, stock options, and other financial compensation, such as forgiveness of loans, automobile expenses, etc. The 70 to 80 percent of the CEOs’ compensations are from gains of exercising stocks. In this tumbling market, shareholders are suffering the loss from the declining stock prices. However, many CEOs are still left with a mountain of wealth. Meanwhile, the board of directors also raises the stock options to retain their top talents even to those who are under‐performing. Besides CEOs’ compensations, we will also compare the CEO pay with non‐CEO pay packages. The CEOs compensations are still the highest. Furthermore, the average CEO made 42 times the average hourly worker’s pay in 1980, 85 times in 1990, and a staggering 531 times in 2000. Many shareholders are against these out of control pay packages. We conclude that it is time to review the process of determining the CEOs compensation, and that the significant presence of pay‐by‐performance should be taken into account in any examination of the practice and regulation of corporate governance.

The chapter investigates three channels through which private benefits are hypothesized to be extracted in dual class companies: excess executive compensation, excess capital expenditures and excess cash holdings.

With a propensity score matched sample of S&P 1500 dual class and single class companies with concentrated control, the chapter analyzes the relationship between the valuation discount of dual class companies and measures of excess executive compensation, excess capital expenditure and excess cash holdings.

Executives in dual class firms earn greater compensation relative to their counterparts in single class firms. This excess compensation is more pronounced when the executive is a family member. The value of dual class shares is discounted most when cash holdings and executive compensation of dual class are excessive. Excess compensation is highest for executives who are family members of dual class companies. The dual class discount is not related to excess capital expenditures.

The research shows that the discount in the value of dual class shares in relation to the value of closely controlled single class company shares is directly related to the channels through which controlling shareholder-managers can extract private benefits.