US picket lines put shareholders in the spotlight
over pay
https://www.ft.com/content/178ce9a3-33df-44cf-8edb-8ed1772285d5
Executive Compensation: The Role of Public Company
Shareholders
https://corpgov.law.harvard.edu/2019/07/31/executive-compensation-the-role-of-public-company-shareholders/
Reining in CEO compensation and curbing the rise of
inequality
https://www.epi.org/publication/reining-in-ceo-compensation-and-curbing-the-rise-of-inequality/
Dean Baker, Josh Bivens, and Jessica Schieder note:
The main justification for why shareholders tolerate huge increases in CEO pay—money that comes directly out of their pockets—is that this higher pay is necessary to attract the CEOs who produce good returns for shareholders. The argument is that a CEO who gets paid $20 or $30 million a year may produce returns to shareholders that are 10 or even 100 times as large as his or her paycheck. In that narrative, shareholders are getting a good deal even with these very high pay packages for CEOs.
Before we turn to the evidence, it is important to be clear about what is at issue. Corporations obviously need to have someone in charge (although there is no reason it needs to be a single person). In that sense, it is trivially true that CEOs contribute an enormous amount of value to shareholders in the sense that corporations contribute value to shareholders and CEOs lead these corporations. But the issue is not how valuable having a CEO is to shareholders relative to having the company operate aimlessly, the question is how valuable a specific CEO is relative to the other people who could fill the position. If the people who are next in line, or who could be hired from other companies, are as capable as the current CEO, then the value of the CEO to the company is only as high as what they would have to pay to replace them.
From 2010: The [CEO] Pay Problem
https://www.ft.com/content/178ce9a3-33df-44cf-8edb-8ed1772285d5
https://corpgov.law.harvard.edu/2019/07/31/executive-compensation-the-role-of-public-company-shareholders/
https://www.epi.org/publication/reining-in-ceo-compensation-and-curbing-the-rise-of-inequality/
Dean Baker, Josh Bivens, and Jessica Schieder note:
The main justification for why shareholders tolerate huge increases in CEO pay—money that comes directly out of their pockets—is that this higher pay is necessary to attract the CEOs who produce good returns for shareholders. The argument is that a CEO who gets paid $20 or $30 million a year may produce returns to shareholders that are 10 or even 100 times as large as his or her paycheck. In that narrative, shareholders are getting a good deal even with these very high pay packages for CEOs.
Before we turn to the evidence, it is important to be clear about what is at issue. Corporations obviously need to have someone in charge (although there is no reason it needs to be a single person). In that sense, it is trivially true that CEOs contribute an enormous amount of value to shareholders in the sense that corporations contribute value to shareholders and CEOs lead these corporations. But the issue is not how valuable having a CEO is to shareholders relative to having the company operate aimlessly, the question is how valuable a specific CEO is relative to the other people who could fill the position. If the people who are next in line, or who could be hired from other companies, are as capable as the current CEO, then the value of the CEO to the company is only as high as what they would have to pay to replace them.