Study: CEO Pay Rise is Attributable to Company Size

A new study concludes that the rise in CEO pay is attributable to market capitalization. Of course, it is supposed to be attributable to performance. So what we learn from this is that there is a perverse incentive for CEOs to make companies bigger instead of better.

In recent decades at least, the size of large firms explains many of the patterns in CEO pay, across firms, over time, and between countries. In particular, in the base- line specification of the model’s parameters, the sixfold increase of U.S. CEO pay between 1980 and 2003 can be fully attributed to the sixfold increase in market capitalization of large companies during that period.

You can read the full paper here.

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