In designing an executive bonus compensation contract, a compensation committee, usually with help from a professional executive compensation consulting firm, uses measures of short-term accounting performance as proxies for executive cash bonuses (McLaughlin & Foulks, 1991). Two measures commonly used are cash flows (CF) and accrual accounting income (INC). We show, analytically, that an implication of the Feltham, Ohlson framework is that the relationship between CF and INC differs depending on whether cash investment is growing, constant or declining over some time period. Through simulation, we provide evidence of this differential relationship. We also provide evidence through simulation that the relationship between CF and INC differs depending on whether the variance of the shocks is low, medium or high. We argue that executive cash bonuses can be excessive depending on these properties. Finally, we find evidence suggesting that economic income (E) may be a poor measure of earnings for which to base executive cash bonuses.