Springtime, in addition to bringing back flowers and birds, also brings forth many companies' proxy statements, including information on CEO compensation. It's a signal for the business press to get to work reporting the details of what appear to be the highest executive pay packages.
Wharton accounting professors Wayne Guay and John Core, and Stanford accounting professor David Larcker, also study executive compensation. What they conclude from their most recent research is that the most relevant information does not necessarily make headlines. They also find that in general, the media's focus on excessive compensation does not substantively change corporate behavior with regards to pay packages.
Big Numbers vs. Small Numbers
"When we look at executive compensation, we use economic models that benchmark CEOs against their counterparts in similar firms, controlling for various characteristics like the size of the firm and the competitive environment that the firm operates in," says Guay. "With this information, we then try to estimate who is getting overpaid or underpaid, which firms have governance problems or issues related to stock options, and so forth. The press might use some of the same models to try and place compensation packages in context, or they may focus instead on producing stories people will find interesting. That might include writing about a person everyone has heard of, even if he or she is not necessarily overpaid."
Guay says he appreciates the balance the press tries to achieve between its role as a watchdog and its desire to offer articles that the public wants to read. For example, he suggests that the composition and competence of corporate boards are important topics for the press to cover, and in fact these issues do get some attention. But "the problem is, they are less sexy than executive compensation.
[continue]
Page 1 of 7
> >>