Executive Superstars, Peer Groups and Over-Compensation — The Harvard Law School Forum on Corporate Governance

Small business of-interest with some how-to included.   Study reviews case history to arrive at a probable and suggested solution.  Compensation

Excerpt:  In the paper, Executive Superstars, Peer Groups and Over-Compensation — Cause, Effect and Solution, which was recently made publicly available on SSRN, we develop a pragmatic approach to understanding the run-up in CEO compensation over the past several decades. Rather than looking to markets or captured boards for the explanation, we argue that the actual mechanical process of peer benchmarking by which pay is set is the cause of the present controversy. From this perspective, we present what we believe will be an effective solution; additionally and collaterally, some interesting lessons about executive recruitment, particularly the CEO “superstar” culture, may be gleaned from our findings. We thank the Investor Responsibility Research Center Institute, which has long funded compensation research, for their financial support and helpful assistance in the development of this paper.

The piece makes a contribution to the executive compensation literature as it offers a novel explanation for the perpetual rise in CEO pay and suggests a significantly different solution to the compensation controversy.

Read full article via Executive Superstars, Peer Groups and Over-Compensation — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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