Link Found Between CEO Pay, Credit Risk

Laughlin, Kate
August 2005
Investment Dealers' Digest;8/1/2005, Vol. 71 Issue 30, p7
Trade Publication
Focuses on a study by Moody's Investors Service Inc. which found an empirical link between excessive CEO compensation and increased credit risk, in the U.S. Indication that issuers with inexplicably high CEO compensation tend to have their credit ratings downgraded and default more often; Possibility that performance-based compensation packages could induce managers to value short-term results over long-term financial solvency; Features of the buyout of Toys "R" Us Inc. which provides a relevant example of the link between credit risk and excessive pay.


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