Team Palm Bay

The article found at http://www.american.com/archive/2008/march-april-magazine-contents/cracking-the-ceo-pay-puzzle is about the recent explosion of executive compensation.  This article follows an investigation lead by Xavier Gabaix into this issue.  Gabaix is a Harvard-trained economist who teaches a NYU.Gabaix and a fellow colleague found that “the sixfold increase in American CEO pay from 1980 to 2003 is almost wholly explained by the roughly sixfold increase in market capitalization of big U.S. companies over the same period.”  Basically, what the article is saying is that the free market has determined that these CEO’s are worth it, so this is the pay they deserve.  Gabaix does note that there are exceptions and a few CEO’s are crooks but it is not true for the majority.

Regarding this topic on exorbitant CEO pay, I have the same reaction of disgust as the majority of the population.  I began investigating this topic with my opinion on it already decided. This article though, has made a strong case to me and I am not quite as disgusted as when I began.  In fact, my initial opinion on this subject, which was based on nothing, might soon be replaced by a new opinion that is based on a Harvard economist.  CEOs get what they deserve. M. Markham