This paper explores the differences between executive compensation regimes in France, the United States, and China. It asks whether there is a link between state regulation of real options as a form of executive compensation and state regulation of shareholder protections. This paper argues that if a country regulates the use of real options as compensation, then that country is also more likely to have strong shareholder protection laws. This argument seems to be true based on a descriptive review of executive compensation law and shareholder protections in France, the United States, and China.

If it is true that countries that regulate real options compensation are more likely to enact strong shareholders protections, then it is also likely that these countries are relying on the Crowding Out Theory. Under the Crowding Out Theory, executive compensation is designed to strike a balance between low pay, which motivates executives to work harder , and high pay, which disincentives executives from pursuing alternative forms of compensation that would harm shareholders.