« Confusing Libertarians with Communists | Main | CEO Pay II: A Speculation» Don Boudreaux
May 28, 2004
CEO Pay I: The Easy and Uninteresting Answer
Don Boudreaux
Executive compensation has long been a favorite topic of the economically illiterate. The man in the street and the pundit in the papers never weary of discoursing on how obscenely excessive is the pay of CEOs. (Similar objections are aimed at the pay of superstar athletes, although, mysteriously, not at that of superstar entertainers. See Allen Sanderson.)
The most-obvious response is that CEO pay is set by market forces. Because there’s no reason to assume that shareholders generally extend charity to high-level employees of their firms, there every reason to assume that CEOs’ salaries and bonuses reflect as accurately as possible their market values.
On the policy question of whether or not government should intervene to limit CEO pay, the answer is radiantly clear to anyone who knows some economics: no. It isn’t even an interesting question.
The more-interesting question is why the value attached by the market to CEO skills is so high. I will speculate in a later post on what might be a part of the answer. My speculation will rely upon the observation that the consumption abilities of very wealthy Americans is increasingly less distinct from the consumption abilities of ordinary Americans.
Posted by Don Boudreaux in The Economy | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d834518ccc69e200d8345d7e9369e2
Listed below are links to weblogs that reference CEO Pay I: The Easy and Uninteresting Answer:
» Links Catalog Search Results For: nilstat from Public Library - Health - Drugs & Medicines
Search the Web:. OneBigVillage Home! Search the Web! Check Your Village Mail! Chat Now! ... Over the Counter (0). Prescription Drugs (0) Painkillers ... [Read More]
Tracked on Apr 7, 2006 11:07:56 PM
» Kim Venturo Joins Undiscovered Artists! as an American Agent from LLC and Independent
joins Undiscovered Artists! as an American agent. (PRWEB May 1, 2006)
[Read More]
Tracked on May 3, 2006 1:52:20 AM
» Swimming In Shallow Water from has to try to
many would-be Woodwards to enroll in j-school. It's not all so absurd: Some days you might have a chance to [Read More]
Tracked on May 3, 2006 10:28:09 PM
» Jewelry Shop from Jewelry making, Tips from The Jeweler's bench - Jewelry making
The Gem and Jewelry World's foremost Resource on The Internet. ... The Jeweler's Selected Bibliography. Add Ganoksin Power Search to your website ...
[Read More]
Tracked on May 20, 2006 11:15:52 AM
» Ontario Ministry of Northern Development and Mines Receives Award for Their Geology Ontario and CLAIMaps Applications from a GIS-based application
in Sault Ste. Marie in recognition of creating a GIS-based application for disseminating Ontario's geology and mining information to key stakeholders. [Read More]
Tracked on May 29, 2006 7:51:22 PM
» Internal Audit: Resources for Internal Auditors from Audit Company
Internal Audit - is the Web portal and online community for the internal audit profession provides free audit work programs, ICQ's, checklists, ...
[Read More]
Tracked on Jun 7, 2006 7:08:15 AM
» Hero Quietly Did The Right Thing from And even though
France, as Hitler rounded up Jews and began killing them. And even though [Read More]
Tracked on Jun 8, 2006 1:39:21 AM
» Correct The Pap, Too from never be taken
David Cay Johnston that makes an important point about corrections in the media: The number of corrections run annually is a lousy measure [Read More]
Tracked on Jun 8, 2006 10:55:13 PM
» Iran Roundup: "We Do Not Give a Damn..." from with the United
calls to halt its nuclear work, hours before the UN atomic watchdog reports [Read More]
Tracked on Jun 11, 2006 2:52:15 PM
