Beware the Self-Serving Critics

Abstract

Shareholders, taxpayers, consumers and voters must be wary of wolves dressed in sheepskin currently attacking executive compensation to achieve their own ends. Many assert that executives are overpaid and paid in a way that is independent of performance. Noteworthy is the lack of accusation of fraud or illegal behavior. Most important, the attack has excited little support on the part of shareholders, who, after all, pay the bill. Shareholders recognize that there is no issue, a conclusion supported by the best scientific evidence currently available. The consensus of more than 60 leading academicians at a recent University of Rochester conference was that executive salaries are determined by the market, and that changes in compensation are strongly related to company performance. Moreover, no one expressed concern that compensation was too high.

Keywords: CEO Compensation, executive compensation, corruption, fraud