Two Goals for Executive Compensation Reform
18 Pages Posted: 24 Aug 2007
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: Suggested Citation