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CEO Pay, Incentives and Governance Brian Bell and John Van Reenen Discussant: Alex Bryson

CEO Pay, Incentives and Governance Brian Bell and John Van Reenen Discussant: Alex Bryson NIESR Performance Pay Workshop, 26 th June 2014. Why Does All of This Matter?. Efficiency Are we getting the right people to the top and are we paying them in a way that gets the best out of them?

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CEO Pay, Incentives and Governance Brian Bell and John Van Reenen Discussant: Alex Bryson

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  1. CEO Pay, Incentives and Governance Brian Bell and John Van Reenen Discussant: Alex Bryson NIESR Performance Pay Workshop, 26th June 2014

  2. Why Does All of This Matter? Efficiency Are we getting the right people to the top and are we paying them in a way that gets the best out of them? Equity Total share of all earned income going to the top Policy If we are worried about efficiency or equity what should we do Government Firms

  3. Difficult Terrain Technically tricky Deferred compensation makes it hard to disentangle which performance the CEO is being compensated for Separating “luck” from the CEO causal effect So inference is tricky How sure can we be about what we have found Just as well we’ve got Brian Banker Economist Pragmatist

  4. Focus on governance Yes elasticities have risen Much of it appears to be luck Hard to tie pay to CEO performance with LTIPs But governance can help Institutional investors’ ability/incentives to monitor But is there anything else we can do? China: CEO sits on own Compensation Committee, gets premium Non-executives? Shareholder right to vote may make things worse Blunt instruments may make things worse Caps on bonus as % salary?

  5. The Labour Market for CEOs and The Rest What lies behind managerial power? How scarce are these skills? CEO merry-go-round How global are CEO markets? How global should they be? Tournaments – do they work? Interesting to see how little other workers share in firm fortunes How much should we care? After all they are exposed enough (wages, employment) And have limited ability to change things

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