Why Has CEO Pay Increased So Much?

Gabaix, Xavier; Landier, Augustin

doi:10.2139/ssrn.890829

Cited by 480 publications

(702 citation statements)

References 101 publications

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“…To assess financial regulation in the light of bankers’ pay, I offer a model of a competitive labor market by banks for teams of bankers. This endeavor builds on the seminal contributions of Gabaix and Landier (2008) and Edmans, Gabaix, and Landier (2009). In these papers, the authors offer a model of a competitive labor market for CEOs.…”

Section: Calibration Of the Impact Of Remuneration On Bank Default Riskmentioning

confidence: 99%

“…Hence, the relevant probability will lie in the left tail of

F_{n}

. I now follow Gabaix and Landier (2008) and use insights from extreme value theory. I assume that the density

f

is regular as it approaches zero so that the following limit, which describes the tail behavior, exists and is finite:

lim_{x ↓ 0} x f (x) / F (x) = γ \in (0, \infty) .

Reflecting in the origin, it follows that the right‐hand tail of the distribution function

F (- x)

is in the domain of attraction of the right‐hand tail of the Weibull class of distributions.…”

Section: The Modelmentioning

confidence: 99%

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The Case for Intervening in Bankers’ Pay

Thanassoulis

2012

The Journal of Finance

129

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This paper studies the default risk of banks generated by investment and remuneration pressures. Competing banks prefer to pay their banking staff in bonuses and not in fixed wages as risk sharing on the remuneration bill is valuable. Competition for bankers generates a negative externality, driving up market levels of banker remuneration and hence rival banks' default risk. Optimal financial regulation involves an appropriately structured limit on the proportion of the balance sheet used for bonuses. However, stringent bonus caps are value destroying, default risk enhancing, and suboptimal for regulators who control only a small number of banks. * John Thanassoulis is at the University of Oxford.

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Section: Calibration Of the Impact Of Remuneration On Bank Default Riskmentioning

confidence: 99%

“…Hence, the relevant probability will lie in the left tail of

F_{n}

. I now follow Gabaix and Landier (2008) and use insights from extreme value theory. I assume that the density

f

is regular as it approaches zero so that the following limit, which describes the tail behavior, exists and is finite:

lim_{x ↓ 0} x f (x) / F (x) = γ \in (0, \infty) .

Reflecting in the origin, it follows that the right‐hand tail of the distribution function

F (- x)

is in the domain of attraction of the right‐hand tail of the Weibull class of distributions.…”

Section: The Modelmentioning

confidence: 99%

The Case for Intervening in Bankers’ Pay

Thanassoulis

2012

The Journal of Finance

129

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“…Jensen and Meckling, 1976 and Jensen and Murphy, 1990) is that increased executive compensation can be an efficient consequence of an attempt to align top management salaries with those of shareholders. Gabaix and Landier (2008) emphasize the role of increasing firm size in explaining the increase in executive compensation, although Lemieux (2008, fn5) points out that the finding is sensitive to specification, and Gordon and Dew‐Becker (2008) argue that it is sensitive to measures of firm size and choice of time period. A very different possibility is that of Bebchuk, Fried and Walker, 2002 and Bebchuk and Fried, 2004 who argue that higher CEO salaries are largely a result of the CEO's co‐opting corporate governance by influencing the choice of company directors.…”

Section: Potential Explanations For the Surge10mentioning

confidence: 99%

Top income shares in Canada: recent trends and policy implications

Veall

2012

Canadian J of Economics

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According to Canadian taxfiler data, over the last thirty years there has been a surge in the income shares of the top 1%, top 0.1% and top 0.01% of income recipients, even with longitudinal smoothing by individual using three- or five-year moving averages. Top shares fell in 2008 and 2009, but only by a fraction of the overall surge. Alberta, British Columbia, and Ontario have much more pronounced surges than other provinces. Part of the Canadian surge is likely attributable to U.S. factors, but a comprehensive explanation remains elusive. Even so, I draw implications for policies that might achieve some support from across the political spectrum, including the elimination of tax preferences that favour those with high incomes, the promotion of shareholder democracy and, to maintain Canada's relatively high intergenerational mobility, continued wide accessibility to healthcare and education.

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“…changes in the distribution of tasks, but also through changes in the productivity of worker–task pairs over time . For instance, Gabaix and Landier () and Terviö () exploit this unique feature of assignment models to explain (the rise in) CEO pay differentials. Both studies conclude that the distribution of managerial talent is in fact not very dispersed and that the bulk of (the rise in) CEO pay differentials is due to firms characteristics, i.e.…”

Section: Introductionmentioning

confidence: 99%

The Assignment of Workers to Tasks with Endogenous Supply of Skills

Dupuy

2014

Economica

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Why Has CEO Pay Increased So Much?

Cited by 480 publications

References 101 publications

The Case for Intervening in Bankers’ Pay

The Case for Intervening in Bankers’ Pay

Top income shares in Canada: recent trends and policy implications

The Assignment of Workers to Tasks with Endogenous Supply of Skills

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