How Much Sunlight Does it Take to Disinfect a Boardroom? A Short History of Executive Compensation Regulation in America
AbstractThis article reviews the history of executive compensation regulation in America and surveys the literature on the effects of these policies. CEOs are almost exclusively in the top 1% of the pay distribution, and regulation of their pay is seen as a well-targeted way of reducing income inequality. Mandatory disclosure of executive compensation has increased nearly uniformly since 1933. A number of other regulations, including special taxes on CEO pay and rules regarding votes on some pay packages have also been introduced, particularly in the last 20 years. However, there is little solid evidence that any of these policies have had any substantial impact on pay. I also review limited evidence from overseas on 'Say on Pay', recently proposed in the US, which would allow nonbinding shareholder votes on CEO compensation. The experiences of other countries have been positive, with tighter linkages between pay and performance and improved communication with investors. Mandatory say on pay would be beneficial in the United States, both increasing shareholder value and making CEO pay fairer, thus reducing the likelihood of passage of other legislation to reduce income inequality, such as higher taxes on the rich. (JEL-codes: J01, J08, J33, K22) Copyright , Oxford University Press.
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Bibliographic InfoArticle provided by CESifo in its journal CESifo Economic Studies.
Volume (Year): 55 (2009)
Issue (Month): 3-4 ()
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- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
- J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
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- Helmut Dietl & Martin Grossmann & Markus Lang & Simon Wey, 2010.
"Incentive Effects of Bonus Taxes in a Principal-Agent Model,"
0140, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Feb 2012.
- Dietl, Helmut M. & Grossmann, Martin & Lang, Markus & Wey, Simon, 2013. "Incentive effects of bonus taxes in a principal-agent model," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 93-104.
- Helmut M. Dietl & Martin Grossmann & Markus Lang & Simon Wey, 2012. "Incentive Effects of Bonus Taxes in a Principal-Agent Model," Working Papers 313, University of Zurich, Department of Business Administration (IBW).
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