Introduction: Indispensable and Other Myths: Why the CEO Pay Experiment Failed and How to Fix It

Indispensable and Other Myths: Why the CEO Pay Experiment Failed and How to Fix It (University of California Press 2014)

15 Pages Posted: 4 Aug 2014

See all articles by Michael B. Dorff

Michael B. Dorff

Southwestern University School of Law

Date Written: July 28, 2014

Abstract

Prodded by economists in the 1970s, corporate directors began adding stock options and bonuses to the already-generous salaries of CEOs with hopes of boosting their companies’ fortunes. Guided by largely unproven assumptions, this trend continues today. So what are companies getting in return for all the extra money? Not much, according to the empirical data.

This posting is an excerpt from my newly released book, Indispensable and Other Myths: Why the CEO Pay Experiment Failed and How to Fix It (University of California Press 2014). The book explores the consequences of this development. It shows how performance pay has not demonstrably improved corporate performance and offers studies showing that performance pay cannot improve performance on the kind of tasks companies ask of their CEOs. Moreover, CEOs of large established companies do not typically have much impact on their companies’ results. Indispensable argues that companies should give up on the decades-long experiment to mold compensation into a corporate governance tool and maps out a rationale for returning to the era of guaranteed salaries.

Keywords: CEO compensation, CEO pay, management, stock option, performance pay, salary, salaries, corporate governance, public company, leadership

JEL Classification: D30, D71, D81, D84, J30, J33, J38, J39, J44, J49, K20, K22, M10, M12, M14, M51, M52

Suggested Citation

Dorff, Michael B., Introduction: Indispensable and Other Myths: Why the CEO Pay Experiment Failed and How to Fix It (July 28, 2014). Indispensable and Other Myths: Why the CEO Pay Experiment Failed and How to Fix It (University of California Press 2014). Available at SSRN: https://ssrn.com/abstract=2473155

Michael B. Dorff (Contact Author)

Southwestern University School of Law ( email )

3050 Wilshire Blvd.
Los Angeles, CA 90010
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
321
Abstract Views
1,146
rank
92,473
PlumX Metrics