As public outrage over excessive CEO pay reaches ever higher peaks, virtually matching the excesses of the compensation itself, some new research offers a dissenting view of the subject.
The authors of a new study to be presented Mon., Aug. 14, at the annual meeting of the Academy of Management (Atlanta, Aug 13-16) do not dispute that there is ample cause for outrage over CEO compensation. But, in their view, the general approach advocated by most corporate-governance reformers in dealing with the problem is misguided.
"Why is it that big CEO payouts cause so much more outrage than the amounts earned by show biz celebrities or sports stars?" asks Charles O'Reilly of Stanford University, a co-author of the study with Brian Main of the University of Edinburgh. "The crucial difference, of course, is that the celebrities and sports stars are awarded that money by the market, while CEOs are awarded money by their boards, with whom they often have friendly relations. That doesn't look right to a lot of people, particularly stockholders, who want to see the boards maintain an arm's-length relationship with top executives, continually monitoring them on shareholders' behalf.
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