Naked Capitalism:
How CEOs get paid for luck
8 August 2016
Lacklustre growth seems to be the new normal almost everywhere in the world except for one area - the pay of chief executive officers (CEOs). For S&P500 firms, the average CEO made 31 times the wage of the average production worker in 1970, but this rose to 325 by 2008 (Conyon et al. 2011) and 335 by 2015. This has not gone unnoticed by politicians and the media. CEO pay could have risen purely through market forces. For example, globalisation and technological change enables a CEO to leverage his ability (it is rarely ''her'') over a larger scale. As the size of firms increases, so does CEO pay (e.g. Gabaix and Landier 2008). But other factors may also play an important role, as attested by many corporate governance scandals. And why does CEO pay rise when firm performance does not, or when firms do well for reasons unrelated to the talent or effort of the CEO (for example, in a stock market bubble or oil price boom)?
This article was published online by Naked Capitalism on August 8, 2016
Link to article here
Related article
August 5, 2016
Vox
CEO pay and the rise of relative performance contracts: The role of governance, Brian Bell and John Van Reenen.
Related publications
CEO Pay and the Rise of Relative Performance: A question of governance?, Brian Bell and John Van Reenen, Centre for Economic Performance Discussion Paper No. 1439, July 2016.
Related links
Brian Bell webpage
John Van Reenen webpage
Growth Programme webpage