In a recent interview author and economist Tim Harford argued that CEO compensation is not based on the economic value of the CEO’s leadership. Instead, companies compensate their CEO’s generously in order to provide an incentive to aspiring CEOs. In this view, an executive compensation package is a sort of lottery prize designed to motivate those further down the corporate ladder.
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Jim Bauer 03.25.08 at 16:16
On average CEOs are paid about 400 times that of the regular worker, and that’s where I find my trouble with the whole issue of CEO compensation. Of course they are talented people and they should be paid well at the highest level of the corporation. But NOT 400 times the average worker. I’ve long held that shareholders should have a vote on what the CEO gets paid. We own the company, not the directors whom we’ve hired, nor the CEO.
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