Question A:
The typical chief executive officer of a publicly traded corporation in the U.S. is paid more than his or her marginal contribution to the firm's value.
Responses
Responses weighted by each expert's confidence
Question B:
Mandating that U.S. publicly listed corporations must allow shareholders to cast a non-binding vote on executive compensation was a good idea.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 John Campbell |
Harvard | Bio/Vote History | ||
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The marginal value of management skill for a large corporation can be enormous. But it is hard to rule out that CEOs are extracting more than their marginal contribution in some cases.
-see background information here |
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Executives get paid a lot more than you and me. But companies are huge, and pretty competitive market. Much pay stocks anyway. Think of how much a bad CEO can ruin a company!
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 Francesca Cornelli |
Northwestern Kellogg | Bio/Vote History | ||
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I think the evidence is mixed
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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These markets seem competitive and there is active search for talent.
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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This is a complex issue.
-see background information here |
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 Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Kenneth R. French |
Tuck Dartmouth | Did Not Answer | Bio/Vote History | |
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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The view that the CEO market works well and competitively explains the facts much better than the “CEOs are overpaid” view: across time, firms, countries.
-see background information here -see background information here |
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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 Lars Hansen |
UChicago | Bio/Vote History | ||
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I find it hard to give a global answers even with the term typical in the question. The heterogeneity incompensation heterogeneity is substantial and are the job expectations.
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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It is difficult to measure "marginal" value - hence, the uncertainty. However, it is very unlikely there is a persistent bias in a large cross-section of companies. Yes, some are likely overpaid - but some are likely underpaid.
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 David Hirshleifer |
USC | Bio/Vote History | ||
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The answer is non-obvious.
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 Harrison Hong |
Columbia | Bio/Vote History | ||
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Evidence in the literature is mixed on this issue.
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Commonly asserted but it is very hard to tell. The fact that CEO pay fell during the 2000s is not widely known.
-see background information here |
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 Ralph Koijen |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Corporate governance is not as strong as it needs to be to make sure the CEOs get paid just their marginal product. Most CEOs are overpaid, and can be replaced with equally high ability types for lower pay, if the boards would be willing to do this.
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 Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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How could one possibly know that a CEO is being paid more or less than their marginal value? What does "value" mean??
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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While agency issues in some firms can contribute to the CEO being overpaid, investor monitoring should mitigate the extent of this.
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Evidence is mixed and varies over time possibly due in part to regulatory changes. Probably some executives can still manipulate pay, and this contributes something to high compensation.
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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 Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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Unless you think the labor market for CEOs is inefficient and not competitive, where CEOs have some market power, they should be paid pretty close to their MP and there is reasonably high confidence that this market is pretty efficient.
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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A mediocre CEO does a lot of harm. My uncertainty comes from the fact that CEO compensation comes in part depends on the irrelevant and that some firms depend on competition for the rewards for the top positions as motivation for lower level executives.
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 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Very difficult to observe the marginal value and there is stickiness in compensation.
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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On balance there are more forces pushing pay above marginal productivity than the other way.
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 Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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I don't think we have conclusive evidence one way or the other and there is almost surely significant heterogeneity.
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 Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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First, on the generic question, I am fairly confident that the literature is not conclusive on excessive pay for the "typical" CEO. Second, on the specific question, it is really hard to measure CEO's marginal contribution to the firm's value.
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Don’t have good measurements that have been consistently done.
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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While there are extremes in CEO pay, which we can all provide anecdotal stories about, I think the average CEO of a well-governed, publicly traded company is not overpaid. There is much transparency and oversight – activist investors, shareholder votes, media, etc.
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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 René Stulz |
OSU Fisher School | Did Not Answer | Bio/Vote History | |
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 Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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I do not see how one could empirically estimate the marginal value of a CEO with a high degree of confidence. So difficult to know whether a typical CEO is overpaid or underpaid. Could be either.
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Some are overpaid and some are underpaid
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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theory is inconclusive on whether high CEO pay is value maximizing for shareholders or the result of rent extraction; depends on assumptions on talent distribution, importance of incentives to provide effort, etc.
-see background information here |
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 Ingrid M. Werner |
OSU Fisher School | Bio/Vote History | ||
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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John Campbell |
Harvard | Bio/Vote History | ||
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This is almost certainly not harmful, although there is little solid evidence that it affects CEO pay.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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"Mandating." By who? If good, why does it need law/regulation? Why don't they do it now? Representative democracy is good, not every decision should be voted by shareholders. Shareholder voting is very distorted now, and political agendas creeping in.
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Francesca Cornelli |
Northwestern Kellogg | Bio/Vote History | ||
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I think there is information in there for the directors
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Shareholders are not well informed in many cases.
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Shareholder preferences matter. Boards of directors represent shareholders, and often make better decisions than they would, on their behalf, but the proposed vote is merely advisory.
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Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Kenneth R. French |
Tuck Dartmouth | Did Not Answer | Bio/Vote History | |
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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When no large externality is involved, we should let the market discover optimal private arrangements.
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Lars Hansen |
UChicago | Bio/Vote History | ||
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This should be decided by corporations and their boards on a case by case basis.
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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It is the job of the board of directors to determine senior compensation. The board has full information. The shareholders do not have that information. If board members are not doing their job, then the shareholders should replace the board members.
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David Hirshleifer |
USC | Bio/Vote History | ||
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This provision could be written into corporate charters if shareholders desired it.
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Harrison Hong |
Columbia | Bio/Vote History | ||
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There are governance benefits of say on pay but with polarized american society could also be issues.
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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We know that it does not seemed to have changed outcomes much so far. Does take up some resources, but the threat might wind up being ok.
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Ralph Koijen |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Shareholders need to have a voice in determining managerial pay. This is a decent mechanism to have this voice be heard.
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Andrew Lo |
MIT Sloan | Bio/Vote History | ||
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This law creates the opportunity for adding more noise to the governance process. The shareholders already have a mechanism for addressing executive compensation: the board of directors. Why should we expect a typical shareholder's opinion to be more informed than the board's?
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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This mechanism for affecting compensation seems way less efficient and ineffective compared to competitive labor markets for talent. Seems like a waste of time with no impact.
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Activist shareholders that are paying attention and see overpayment can always push for shareholder votes, but typically, the Board is paying attention to executive pay while most of the time, most shareholders are not.
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Reduces the cost to shareholders of monitoring and exercising governance rights.
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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The vote and the disclosure that comes with it is a good idea, but its impact is limited.
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Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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Shareholders vote would lead to greater transparency with very low cost. The rule led to greater disclosure of pay structure and disclosure is good. It is unlikely to have a strong impact. Thus, if one believes we have a big problem, it is a fig leaf without much effects.
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Say on pay proposals give all shareholders “voice” – research has shown that this voice can have effects, not just on compensation but also performance. The question is whether this is the most cost-efficient method to achieve these goals for both large investors and companies
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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René Stulz |
OSU Fisher School | Did Not Answer | Bio/Vote History | |
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Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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There is enough evidence on CEO capturing boards that requiring a non-binding shareholder vote on pay seems reasonable, and the downsides don't seem so significant to me. Also, research suggests that say on pay votes are on net beneficial for companies. See link.
-see background information here |
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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I don’t think it matters much
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Don't see the point of a non-binding vote as long as CEO pay is properly disclosed. Whatever effects this policy has on pay outcomes can be achieved by disclosure.
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Ingrid M. Werner |
OSU Fisher School | Bio/Vote History | ||
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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