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Compensation for CEOs of S&P 500 companies averaged $18.3 million in 2021, according to an AFL-CIO report. Bloomberg Wealth finds that more than 30 public-company executives had total compensation—including salary, stock and options grants, and other forms of pay—upward of $100 million in 2021. Does executives’ eye-popping pay reflect the value they bring to their companies? Was Dodd-Frank’s mandate that public companies give shareholders a voice in executive pay a productive measure?
Chicago Booth’s Initiative on Global Markets posed these questions to its US Economic Experts Panel 10 years ago, and revisited them in September 2022 with the members of its newly created Finance Panel. Relative to the results of the 2012 poll, respondents to the more recent poll were much less likely to agree that CEOs are overpaid, but a plurality still agreed that shareholder voice in executive pay is beneficial.
Laura Starks, University of Texas
“While there are extremes in CEO pay, which we can all provide anecdotal stories about, I think the average CEO of a well-governed, publicly traded company is not overpaid. There is much transparency and oversight—activist investors, shareholder votes, media, etc.”
Thomas Philippon, NYU
“On balance there are more forces pushing pay above marginal productivity than the other way.”
Amir Sufi, Chicago Booth
“I do not see how one could empirically estimate the marginal value of a CEO with a high degree of confidence. So difficult to know whether a typical CEO is overpaid or underpaid. Could be either.”
Camelia Kuhnen, University of North Carolina
“Shareholders need to have a voice in determining managerial pay. This is a decent mechanism to have this voice be heard.”
Campbell R. Harvey, Duke
“It is the job of the board of directors to determine senior compensation. The board has full information. The shareholders do not have that information. If board members are not doing their job, the shareholders should replace the board members.”
Christine Parlour, University of California at Berkeley
“Reduces the cost to shareholders of monitoring and exercising governance rights.”
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