Monday, July 28, 2008

explaining differences in ceo pay

Why does a CEO of one company make more than a CEO of another company? Is a million dollar pay difference due to differences in ability? Marko Tervio of the Haas School of Business at Berkeley suggests not. His paper in the most recent American Economic Review suggests that variation in CEO pay is mostly explained by firm characteristics, not differences in ability.

This means that a CEO at a Fortune 100 company probably isn't that much better than a CEO at a Fortune 1000 company. But they earn more because their firms earn more.

Read the article

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