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Sunday, October 04, 2015

'Paying CEOs Fat Bonuses for Stock Performance Doesn't Work'

People on Twitter seemed interested in this:

Paying CEOs fat bonuses for stock performance doesn't work, by Lawrence Lewitinn, Yahoo Finance: It turns out offering CEOs huge bonuses to boost shareholder returns doesn’t actually work, according to a new study from Cornell University.
The analysis, done in conjunction with consultants Pearl Meyer & Partners, examined a decade’s worth of data from every company in the S&P 500. It compared companies that offer their top brass a total shareholder return (TSR) plan to those that don’t and found the increasingly popular pay plans haven't significantly boosted any of a number of key metrics. ...

To be fair, I should note that this is qualified. The end of the article points out that this "doesn’t rule out other performance bonuses" that avoid the problems associated with this particular method of trying to align the preferences of CEOs with those of stockholders. Nevertheless, I'm skeptical.

    Posted by on Sunday, October 4, 2015 at 05:43 PM in Economics, Market Failure | Permalink  Comments (8)


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