I measure the social cost of stock-based compensation schemes in a model in which the CEO learns from market prices. In my model, all agents commit a small correlated error when forming their expectations about future productivity. The equilibrium stock price thus aggregates private information with noise. I show that a stock-based compensation scheme leads the CEO to overuse the price information by a factor of three, which in turn makes the excess return and investment growth excessively volatile. I calibrate a DSGE model that embeds this mechanism, and estimate an implied welfare loss of 0.55% of permanent consumption. Surprisingly, if households were given the choice within this model of preserving the status quo or forcing the CEO to ignore all price information, they would choose the latter. ∗I would like to thank Fernando Alvarez, Will Cong, Douglas Diamond, Tarek Hassan, Zhiguo He, Juhani Linnainmaa, Thomas Mertens, Stavros Panageas, David Schreindorfer, Nancy Stokey, Amir Sufi, Harald Uhlig, Pietro Veronesi, Verena Werkmann, and Mirko Wiederholt for helpful comments and discussion. I am also grateful for comments from seminar participants at Goethe University Frankfurt and University of Chicago (Econ and Booth). †Email: schneemeier@uchicago.edu; Website: http://home.uchicago.edu/schneemeier/