5. Variable measurement and methodological approach
5.1. Executive incentives
We have detailed data about the annual salary, annual bonus, annual restricted stock and option grants, and expected payouts from long-term incentive plans for each executive in our sample. We use this information to calculate two complementary measures of incentive compensation. Our first measure is the total value of annual executive compensation, which is computed as the sum of all of the components of compensation, where restricted stock is valued using the market value at the date of the grant and stock options are valued using the Black-Scholes risk-neutral value.