Are CEOs Worth Their Salaries?

from the artificially-small-markets dept

I’ve been interested in executive compensation issues for a long time – ever since my econ 101 professor many years ago spent an awful lot of time on the subject. Turned out a lot of his research was in that area, so it’s good to see him quoted in the following article wondering if CEOs are worth their salary. There are two main issues discussed in the article. One is that the focus seems to have shifted recently towards what kind of compensation CEOs receive – and many argue that’s irrelevant compared to how much compensation they receive. The other big issue (which we’ve discussed before) is that there is a myth that their is a very small pool of potential CEO candidates. That belief that there is a very limited supply has continually pushed up CEO compensation to ridiculous levels – despite the fact that there is no evidence that a star CEO (or a highly compensated one) does anything to help a company. Now, I’m all for an open market, and if a CEO can negotiate an insane salary, that’s his or her (though, mostly his) own business – though, it makes you wonder if they really are going to act in the “best interests” of the shareholders they’re supposed to be representing. However, if more people are educated about this subject, then they realize that (1) very high CEO salaries may not be in the shareholders best interest and (2) the pool of potential candidates is probably larger than they thought, then we might executive compensation reach more reasonable levels. On a completely unrelated note, I also hold that same professor in extraordinarily high regard for allowing me to actually take my econ 101 final exam (my first ever in college) despite oversleeping and showing up two hours late – looking like I was about to have a heart attack.

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Comments on “Are CEOs Worth Their Salaries?”

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Anonymous Coward says:

It's worse than it looks

Have worked on the executive compensation system of a major company, it’s amazing how much of the compensation is never reported on the annual statement. Such as compensating for the tax hit they take on the big bucks. and on, and on, and on.
For every $1.00 shown on the statement, figure $5 you don’t see.

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