Tuesday, August 22, 2006


Common Sense in Print

Are CEOs Really Overpaid? - Newsweek: International Editions - MSNBC.com: "A more effectively contrarian argument comes from a pair of, surprise, French academics in America. Xavier Gabaix of MIT and Augustin Landier of NYU say that since 1980 the pay of CEOs has risen in lock step with the market capitalization of their companies: both are up 500 percent. Using this logic, CEOs like Chevron's David O'Reilly (who collected some $25 million in 2005) aren't overpaid, because they are running ever bigger, riskier firms, making decisions that touch more and more people. 'The supply of CEOs for large companies is capped, because they need to have experience at other large companies,' says Landier. 'Meanwhile, the supply of skilled workers around the world has increased.' No amount of regulation or disclosure, say the pair, will change the fundamental trend of bigger paychecks at bigger companies. 'It's very much like pay for top actors or sports stars,' says Gabaix. 'If you have the talent to be among the best 500 in your field, you'll be rewarded accordingly."

This is just what makes sense. It is too easy to hate company executives, and considerably easier than becoming a successful one.

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