Two Goals for Executive Compensation Reform

18 Pages Posted: 24 Aug 2007

See all articles by Brett McDonnell

Brett McDonnell

University of Minnesota Law School

Abstract

Most corporate law scholars who suggest reforming executive compensation worry about corporate governance problems that arise out of poor compensation design. Most politicians who suggest reforming executive compensation seem as or more worried about growing economic inequality. This essay briefly considers two arguments justifying legal scholars in ignoring the concern with inequality. The first argument says that we should address inequality concerns only through tax and transfer policy. This essay responds that politics may dictate sometimes trying to reduce inequality through other means as well. The second argument claims that high pay for the top executives of public corporations has played only a small role in the growth of economic inequality. This essay finds this argument much more persuasive, but suggests reasons why further empirical investigation may still show that reforming executive compensation may be a modestly important part of a broader package of reforms to reduce inequality.

Keywords: executive compensation, inequality, corporate governance

JEL Classification: D30, G30, H20, K22

Suggested Citation

McDonnell, Brett H., Two Goals for Executive Compensation Reform. New York Law School Law Review, Vol. 52, 2007, Minnesota Legal Studies Research Paper No. 07-34, Available at SSRN: https://ssrn.com/abstract=1008356

Brett H. McDonnell (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-625-1373 (Phone)

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