CEO Compensation in the 1990s: Shareholder Alignment or Shareholder Expropriation?

Abstract:     
CEO compensation has been much debated in the 1990s, both in academic circles and in the media. We contrast two views on CEO compensation. The first view is that there has been a very positive trend in CEO compensation - that compensation committees have become more responsive to shareholder requests to better link compensation and performance. This trend may have been, at least in part, responsible for the incredible stock returns of the last few years. The contrasting view states that the strong stock market of the last few years has allowed CEOs to obtain excessively high financial rewards at the expense of largely powerless shareholders. We discuss these views and provide evidence that corroborates both positions. While we are unable to side with one view or the other beyond a reasonable doubt, we speculate that a downturn in the economy will allow researchers to identify which position dominates.

Number of Pages in PDF File: 39

JEL Classification: G32, G34, G38, J33, K22

working papers series