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Are CEO salaries too big? Steven Kaplan, Neubauer Family Professor of Entrepreneurship and Finance , took the opposing view in a May 30 Crain’s Chicago Business article. He squared off in the debate against Dale Moyers, president of the Chicago Compensation Association and director of compensation and benefits at Loyola University of Chicago.
The article took the form of a series of four email responses to questions posed by Crain’s. The use of email allowed each speaker to polish his thoughts.
The debate kicked off with a look at executive salaries for Chicago’s 20 top companies. At an average of $10.3 million, they have increased 35% over the last two years. Kaplan observed that larger salaries “…(boost) the (relationship) of CEO wealth to stock performance by a factor of more than 10.” Kaplan sees that relationship reflected in productivity gains by the U.S. economy that outdistance those of developed countries in Europe and Asia. Moyer countered by asking if “…CEO compensation need(ed) to soar in order for firms to be successful?”
The debate went on to deal with issues such as whether or not huge variable compensation is really needed to motivate CEOs; the role compensation plays in attracting and retaining top management; and whether CEOs warrant pay that is out of proportion to that of lower management.
The complete article appeared May 30, 2005 and can be found at Crain’s Chicago Business . Please note, subscription required.