Why are CEO salaries rising?

Here is one good bit from the newly published Kaplan and Rauh paper “It’s the Market: The Broad-Based Rise in the Return to Top Talent“:

The evidence is not supportive of the arguments that the top incomes have been driven by managerial power or poor corporate governance in public companies.  Public company executives, who should be more subject to problems of managerial power problems, saw their pay and relative standing increase less over this period than executives of closely-held company businesses that are, by definition, controlled by large shareholders or the executives themselves and are subject to more limited agency problems.  Furthermore, the Bakija, Cole, and Heim (2012) findings are not consistent with loosening social norms being an important factor in the increase in incomes at the top, as it is the pay of closely-held businesses — where executive pay is private and undisclosed — that increased the most.

The paper is interesting throughout.


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