Underpaid CEOs?
One of the most seemingly self-evident truths is that senior corporate executives are grossly overpaid, often for shoddy performance. One of the watchdog jobs of academicians is to challenge accepted wisdom and subject it to empirical analysis.
Testifying before Congress on proposed legislation that would require shareholder votes on executive compensation, University of Chicago Professor Steven Kaplan explained that “the boom in private equity suggests that good CEOs are actually underpaid.”
According to research by Kaplan and assistant professor Joshua Rauh, “firms with CEOs whose earnings were in the top 10 percent earned stock returns 90 percent greater than firms in the same industries during the previous five years. Meanwhile, firms with CEOs whose earnings were in the bottom 10 percent underperformed their industries by almost 40 percent over the previous five years....”
So, are CEOs really underpaid or is that just an ivory tower fantasy? Winston would like to find out first hand.
See article in Chicago GSB Magazine
