TITLE

Explaining CEO Compensation: How Do Talent, Governance, and Markets Fit In?

AUTHOR(S)
Rehbein, Kathleen
PUB. DATE
February 2007
SOURCE
Academy of Management Perspectives;Feb2007, Vol. 21 Issue 1, p76
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The article considers questions about excessive executive compensation. The author cites research by Shivaram Rajgopal and Terry Shevlin of the University of Washington, and Valentina Zamora of Boston College about why a majority of large U.S. firms reward chief executives for a bull market, rather than indexing pay to remove market effects, an approach known as relative performance evaluation. The researchers found that some executives set their own pay due to lack of shareholder oversight. The researchers also found that executive job prospects are market sensitive, so pay rises when demand rises because the overall market is strong. The primary finding was that the most talented executives tend to work at companies not using relative performance evaluation.
ACCESSION #
24286168

 

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