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Wednesday, January 24, 2007

The Man is Well-Paid

Outrageous CEO pay is more closely linked to social connections than to merit:

...the more connected board members are, the likelier they are to overpay for executive talent. In some cases, which economists call “interlocking” directorates, this is straightforward: I sit on your board and you sit on mine, and we both have an incentive to be generous. Sure enough, several studies have found that companies with interlocking directors pay C.E.O.s significantly more. ...

...[A] recent study of three thousand companies actually found that the firms whose directors were the most well connected—and which paid their C.E.O.s most lavishly—in fact underperformed the market.

(via kottke.org.)

I'm James Sulak, a software developer in Houston, Texas.

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