The world of executive compensation works in much the same way that professional baseball works- much of your compensation is based on your peers. Often times, executive compensation begins by taking a look at how much a chief executive's peers are making - that is, in companies in the same industry with a similar size. The compensation committee then forms a plan that incentivizes the executive to perform with stock options and perforance-based bonuses.

Investors can find a breakdown of these figures in the company's proxy statements. New compensation rules are supposed to make things easier than ever for individuals to evaluate executive compensation, but there is still a lot of work to be done. In particular, executives do not have to include long-term stock grants in their total compensation amounts, which can make things slightly misleading when making peer comparisons and other measures.