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The facts about executive compensation Clementi and Cooley

The facts about executive compensation Clementi and Cooley. Discussion by Athanasios Vamvakidis 16th Dubrovnik Economic Conference June 2010. Main Contribution:. Takes into account total CEO wealth tied to firm. Main Results:. Top CEOs are paid like superstars….

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The facts about executive compensation Clementi and Cooley

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  1. The facts about executive compensationClementi and Cooley Discussion by Athanasios Vamvakidis 16th Dubrovnik Economic Conference June 2010

  2. Main Contribution: • Takes into account total CEO wealth tied to firm Main Results:

  3. Top CEOs are paid like superstars…

  4. …CEOs even loose money; remarkable dispersion in between

  5. No clear trend in CEO compensation

  6. Compensation driven by performance; link has not been weakened over time

  7. Results driven by company stock prices

  8. Main implication: capping salaries and bonuses misplaced

  9. A very good paper • Very well written • Clear contributions • Interesting and controversial results • A number of robustness tests

  10. But: • To what extent do compensation schemes take wealth linked to firm into account? • Isn’t the CEOs’ amount of wealth linked to firm also their decision? • Shouldn’t compensation-performance regressions include lags? Can we get results if they do? • How about bubble companies that eventually fail? • Wouldn’t Enron’s CEOs fit the results perfectly • What if profit instead of shareholder gain is on LHS? • Small R2suggests there is a lot we still don’t know Still open issues:

  11. Transparency

  12. Are top CEO salaries justified? “They rise on the backs, not the shoulders, of those beneath them”, winner in infographic contest sponsored by “Capitalism: a love story”

  13. Are golden handshakes justified?

  14. What can we learn from cross-country evidence?

  15. Regulate or not regulate? That is the question

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